Morgan Stanley is pounding the table on several stocks as investors wait to see if October markets are tumultous or quiet. The investment bank says these top companies are well positioned for the long term. They include Lineage, Thermo Fisher Scientific , M & T Bank and Taiwan Semiconductor . Lineage Analyst Ronald Kamdem is doubling down on the cold storage warehouse company following a series of constructive management meetings. Morgan Stanley said that even though recent data shows that total cold storage inventory has been down, Lineage still sees plenty of room for growth. “We viewed this to be one of the most bullish comments of the meeting, and suggests multiple avenues of upside to a solid mid-single digit growth ‘floor’, through both internal and external growth,” he wrote. Kamdem is particularly bullish on Lineage’s opportunities in mergers and acquisitions. “With ~33% market share in the U.S. and ~12% market share globally, we see LINE as the acquirer of choice, with the potential for $500mn-$1bn of acquisitions annually for the next 3-5 years in addition to future development opportunities,” he wrote. Lineage shares are off more than 7% in the past month, but at current levels they are just too attractive to ignore, said Morgan Stanley, the lead underwriter in the $78-a-share IPO in July. “Reiterate [overweight] and top pick,” Kamdem said. Thermo Fisher Scientific The medical technology company is firing on all cylinders, according to a team led by analyst Tejas Savant. Morgan Stanley walked away from Thermo’s recent analyst day raving about the stock. “A classic TMO [analyst day] w/ consistency of messaging providing reassurance on sector ownability into ’25,” he wrote. In an uncertain world, Savant praised Thermo’s consistent, robust growth. Overseas growth, especially in China, remains subdued for now, but Morgan Stanley is optimistic that the latest China stimulus will improve the economic outlook. Meanwhile, Thermo shares have plenty more room to run, Savant wrote. The stock is up nearly 13% in 2024. “Scale, unique value proposition, M & A optionality & best-in-class resiliency/execution keep us at OW/Top Pick,” he said. M & T Bank There are several positive catalysts ahead for the Buffalo-based regional bank, according to analyst Manan Gosalia. After a series of recent management meetings, the analyst says M & T is a top idea. “MTB is approaching the sweet spot of improving credit metrics, solid loan growth, lower funding costs and accelerating capital return,” he wrote. In addition, Morgan Stanley sees a “significant runway” for higher margins as the Federal Reserve continues its rate-cutting cycle. That will also help M & T’s commercial real estate (CRE) loan book, the bank noted. “Lower rates will drive down criticized CRE, removing a key investor concern in addition to helping lower capital requirements and improve credit ratings,” Gosalia said. The stock is up 30% this year, but he thinks the stock is still priced far from perfection. “MTB is approaching the sweet spot for earnings growth and multiple re-rating,” Gosalia and his team said. Thermo Fisher “A classic TMO [analyst day] w/ consistency of messaging providing reassurance on sector ownability into ’25. … Scale, unique value proposition, M & A optionality & best-in-class resiliency/execution keep us at OW/Top Pick. … While Chinese growth remains muted, a recovery to 10% remains on the cards aided in part by the multi-year stimulus.” Lineage “Reiterate OW & top pick. … We viewed this to be one of the most bullish comments of the meeting & suggests multiple avenues of upside to a solid mid-single digit growth ‘floor’, through both internal & external growth. … With ~33% market share in the U.S. and ~12% market share globally, we see LINE as the acquirer of choice, with the potential for $500mn-$1bn of acquisitions annually for the next 3-5 years in addition to future development opps.” Taiwan Semiconductor “Our top pick; still in a fast growth stage: Although not official guidance, at a recent broker conference management did mention that the company can probably ‘directionally’ keep its 15-20% revenue CAGR in the coming five years. That is echoed by its recent strong capacity expansion, shared by its equipment supply chain. We think promising long-term growth with [gross margin] expansion makes the stock’s 18x P/E on 2025e EPS even more attractive among Asian semis.” M & T Bank “MTB is approaching the sweet spot of improving credit metrics, solid loan growth, lower funding costs & accelerating capital return … Lower rates will drive down criticized CRE, removing a key investor concern in addition to helping lower capital requirements & improve credit ratings. … Significant runway for [net interest margin] expansion as the Fed cuts rates. … MTB is approaching sweet spot for earnings growth & multiple re-rating.”
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