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Morgan Stanley: The top 20 buys in Europe

There's nowhere to go but up—that's the story for European equities according to Morgan Stanley.

On Wednesday, the bank identified 20 oversold European stocks that it said could pose investment opportunities given recent market volatility—including big names like Credit Suisse, Prudential, BMW and Intesa.

In a research note, Morgan Stanley analysts led by Graham Secker said there was high probability that Europe stock markets would be higher in three months' time. They forecast that the current volatility would be short-lived, rather than the start of a "long and painful bear market."


A trader works on the floor of the New York Stock Exchange.
Getty Images
A trader works on the floor of the New York Stock Exchange.

"We do not believe that the ongoing economic weakness in EM (emerging markets) and China will significantly drag down the European economy," the analysts added.

Global stocks have been hard-hit in recent days, with ferocious volatility in markets due to fears of a Chinese economic slowdown and an imminent hike by the U.S. Federal Reserve to interest rates.

Morgan Stanley's stock picks were spread across industries, with several telecommunication services represented, including Dutch KPN, Danish TDC and Norwegian Telenor.

Several financial giants were also present, such as BNP Paribas, Credit Suisse, Intesa Sanpaolo and Prudential.

Morgan Stanley: Best Oversold Opportunities in Europe

Akzo Nobel ARM BMW BNP Paribas
Centrica Credit Suisse Diageo Engie
IAG Intesa KPN LafargeHolcim
LVMH Norsk Hydro Philips Prudential
Publicis SAP Telenor TDC


The MSCI Europe index is down 16 percent from its April peak, which is comparable to similar troughs seen over the last 40 years, according to Morgan Stanley.

Corrections tend to be "V-shaped," Morgan Stanley said, with stocks historically rebounded between three and 12 months later.


The bank has issued a "full-house buy signal" for European equities, based on market indicators that include valuation, fundamentals and risk. It's the fifth time since 1990 that Morgan Stanley has issued such a call, with four of the recent calls occurring during the market downturns of 2001-2003 and 2007-2009.

Dutch diversified technology company, Philips, is Morgan Stanley's "top pick" given its exposure to healthcare spending, which is picking up across Europe and North America. Plans to exit the lighting business will also generate further value for shareholders, Morgan Stanley said, setting a price target of 29 euros ($33) per share.