Morgan Stanley names the mega trends — and 18 stocks — that are ‘clear investment opportunities’

Published Tue, Jan 19 20216:16 AM EST

Key Points

Digital inclusion, healthcare innovation and inclusion, and healthy eating were three major themes in EU social policy highlighted by Morgan Stanley analysts.

Morgan Stanley has outlined three trends and a number of stocks that are "clear investment opportunities" this year, as the world — and Europe in particular — comes to terms with a changing society in the wake of 2020. In a recent note, Morgan Stanley analysts led by Victoria Irving said that Europe's strategy as it emerges from the coronavirus pandemic, and with a renewed focus on racial inequality, would be both "green" and "digital," but also "fair and inclusive." They identified three actionable themes related to this, and named the 18 stocks through which to capitalize on them. The first theme was digital inclusion and involves a broad rollout of faster internet connections to rural areas and efforts to improve digital skills, supported by the landmark EU Recovery Fund . The pandemic has highlighted the "digital divide" across geographies and wealth brackets, the analysts said in the note, published Thursday. "In particular, 40% of people in rural areas across Europe still do not have access to fast broadband connections, and as highlighted by (European Commission) President Ursula von der Leyen, the Recovery Fund 'has a unique chance to drive expansion to every village'," they highlighted. "Indeed, 20% of the recovery and resilience facility has been allocated to support the digital transformation, with Southern Europe allocated the greatest proportion of the fund." They flagged up Spanish telecoms giant Telefonica and Italy's Inwit (Infrastrutture Wireless Italiane) as the two stocks best placed to ride this wave. The second theme they highlighted was healthcare innovation and inclusion. Through Europe's Pharmaceutical Strategy, new EU4Health and Digital Europe programs, the bloc has prioritized access to affordable medicines and digital healthcare as another key theme of this seismic social shift. "In MedTech , Elekta , Philips , Siemens Healthineers and Fresenius Medical Care are ways to play the theme of digitalization, while we also highlight Philips as a long-term beneficiary of the structural telehealth tailwind," Morgan Stanley analysts said. In the pharmaceutical space, they pointed to Roche as a key beneficiary, owing to the Swiss company's pre-existing use of the digital data and advanced analytics that policymakers hope to further. The Covid-19 pandemic has also sharpened the lens of consumers and policymakers on public health, and the analysts said healthy eating was the third key theme to watch. "Covid-19 has led to increased consumer and policy focus on health. The problems related to healthy eating are not new, but with a renewed focus among policymakers, we see 2021 as a potential pivotal point in time," the note said. They flagged the EU's Farm to Fork program, which is set to introduce a number of measures in 2021, including mandatory nutrition labelling on the front of packaging and initiatives to enhance the reformulation of processed foods. Part of the European Green Deal , the strategy seeks to aid the bloc's transition to a more sustainable food production system. This includes mitigating climate change and enhancing food security and affordability while promoting fair trade and competition. Morgan Stanley highlighted a host of stocks positioned to benefit from this trend, including Ahold Delhaize , Danone , Nestle , Kerry Group , Glanbia , GEA Group , DSM , Evonik, Givaudan , Symrise and Alfa Laval .

In a recent note, Morgan Stanley analysts led by Victoria Irving said that Europe's strategy as it emerges from the coronavirus pandemic, and with a renewed focus on racial inequality, would be both "green" and "digital," but also "fair and inclusive."

They identified three actionable themes related to this, and named the 18 stocks through which to capitalize on them.