Here are 5 top 'secular growth' stock ideas from Morgan Stanley

Published Fri, Nov 25 201611:50 AM EST

Morgan Stanley's research team updated its favorite long-term growth ideas list, a portfolio which aims to find companies that will be able thrive even in any type of macroeconomic environment. "We highlight 82 stocks that we believe can grow strongly even if the global economy grows more slowly than our current GDP forecasts," the research team wrote in a report to clients Tuesday. "We believe these companies all have exposure to longer-term growth drivers, such as a sustainable competitive advantage, a multiyear product cycle, market share gains, or pricing power." The team screened Morgan Stanley's coverage universe for stocks with positive revenue growth for each of the past 12 quarters and projected annual earnings growth of at least 15 percent for the next three years. Additionally, it made a qualitative assessment on each company's future fundamentals and potential "secular growth runway." Here are five companies that made Morgan Stanley's "secular growth stocks" recommended list. Source: FactSet "As the dominant player in U.S. e-commerce, AMZN continues to experience secular growth as retail dollars shift online," analyst Brian Nowak wrote. "As AMZN scales its logistics network and expands its Prime membership program globally, we see a significant opportunity to capture a larger piece of the ~$750bn worldwide e-commerce market (ex-China)." He forecasts more than 20 percent annual sales growth for Amazon's retail business and a 45 percent annual sales increase for Amazon Web Services [cloud computing business] during the next three years. Source: FactSet "We believe Facebook is capitalizing on the secular shift from traditional to online advertising," Nowak wrote. "FB's scale and growing pool of gross profit dollars help create substantial competitive advantages as FB is able to invest more in new initiatives (improved targeting/attribution, new ad units, live video, etc.) to drive further share gains while expanding profit margins." He predicts Facebook can grow its ad sales by more than 30 percent a year in the next three years with 60 percent or higher EBITDA profit margins. Source: FactSet "We see several factors sustaining [Red Hat's] growth longer term: a growing renewal base, ASP increases, JBoss strength, an emerging storage business, new cloud and virtualization offerings, and improving renewals," analyst Keith Weiss wrote. "Red Hat appears better positioned than most infrastructure rivals as workloads shift to public and private cloud environments, where Linux garners higher market share." He estimates Red Hat can increase sales 14 percent annually in the next three years. Source: FactSet "Lululemon has thrived, with sales nearly tripling [from 2010]," analyst Kimberly Greenberger wrote. "We see LULU's sales momentum extending, particularly with international markets and men's apparel still highly underpenetrated." She projects Lululemon will grow its sales by 12 percent a year through 2019. Source: FactSet "American Tower benefits from increasing demand for mobile data across the world. With the largest publicly traded portfolio of cellphone towers, carriers often find it cheaper to expand data capacity by leasing AMT tower space than building their own structures," analyst Simon Flannery wrote. "AMT's leading global footprint positions it to benefit from the rollout of 3G and 4G networks in emerging countries." He estimates American Tower will grow sales 13 percent annually during the next three years.

An Amazon.com employee lifts a box from a conveyor at the company's fulfillment center in Tracy, California.

David Paul Morris | Bloomberg | Getty Images

Morgan Stanley's research team updated its favorite long-term growth ideas list, a portfolio which aims to find companies that will be able thrive even in any type of macroeconomic environment.

"We highlight 82 stocks that we believe can grow strongly even if the global economy grows more slowly than our current GDP forecasts," the research team wrote in a report to clients Tuesday.

"We believe these companies all have exposure to longer-term growth drivers, such as a sustainable competitive advantage, a multiyear product cycle, market share gains, or pricing power."

The team screened Morgan Stanley's coverage universe for stocks with positive revenue growth for each of the past 12 quarters and projected annual earnings growth of at least 15 percent for the next three years. Additionally, it made a qualitative assessment on each company's future fundamentals and potential "secular growth runway."

Here are five companies that made Morgan Stanley's "secular growth stocks" recommended list.