Morgan Stanley’s preference for defensive quality stocks has only increased since June, even as major U.S. stock indexes continue to reach new highs. “After a sharp rise in volatility over the past two weeks, markets (and investors) are looking for direction. Our view remains that growth is now the top concern for equity investors, rather than inflation and interest rates,” said the firm’s chief U.S. Officer Michael Wilson said. He added that a soft landing for the economy remains his base case scenario. “We continue to believe that as interest rates fall further, it makes sense to adopt a more defensive strategy in the portfolio,” he said. Wilson highlighted his screening of quality stocks and defensive stocks, which the company analyzes The stocks also rank among the top 1,000 stocks by market capitalization, according to analysts’ long-term thinking with an Overweight rating. From this filter, the analyst also added three names to his “new money buy list”: Public Service Enterprises, AbbVie and Northrop Grumman. Take a look at some of Morgan Stanley’s favorite stocks below: AbbVie ranks as one of the company’s top quality and defensive stocks. The pharmaceutical company “is increasingly diversifying its drug pipeline and is positioned to deliver revenue and earnings per share growth above industry averages,” Wilson wrote in the note, adding that the company’s research shows that at the Fed Biotech will perform well on a broader scale after the first policy announcement. Sales of AbbVie’s once-best-selling Humira drug have plummeted due to competition from cheaper biosimilars, but sales of several key immunology treatments are still growing strongly. Analysts surveyed by FactSet have a price target for AbbVie stock that would rise just 3.2% from the latest closing price. This year, the stock is up about 23%. Aerospace and defense company Northrop Grumman is favored for its long-term popularity and stability. Morgan Stanley analyst Kristine Liwag considers the stock “undervalued” and reiterated an overweight rating on the stock on Friday, noting the stock’s attractive Liberty profile among peers. Cash flow growth profile and the resiliency of the product mix related to the U.S. nuclear triad. Her $592 price target — much more optimistic than the average FactSet analyst target — suggests the stock has room for 19.7% upside. Facebook parent company Meta Platforms is one of a handful of technology companies listed in the company screen. Morgan Stanley analyst Brian Nowak said in an Aug. 6 report that Meta’s “micro-level innovation and growth dynamics may allow it to better position itself in consumer markets than other companies.” Internet Navigation and Growth,” but the stock’s price-to-earnings ratio has compressed below that, putting the company at greater risk if consumption slows further. Still, the company believes Meta is best-positioned among large tech companies to navigate the uncertain macroeconomic landscape as its advances in artificial intelligence drive higher engagement and monetization times on its platform. Meta shares are up more than 45% this year, with investors maintaining a bullish outlook on the stock after the company beat second-quarter profit expectations and gave an upbeat forecast. Morgan Stanley’s other defensive and high-quality stocks include consumer discretionary brands Walmart and Lowe’s.
