Check out these 10 'cheap' stocks as lockdowns ease, Morgan Stanley says

Published Mon, Mar 8 20211:56 AM EST

Lucy Handley @in/lucy-handley-b2b0a61a/@lucyhandley

Morgan Stanley has picked 10 "cheap" stocks set to benefit as countries get ready to relax their lockdown rules put in place during the coronavirus pandemic. Its picks are part of its "best ideas" for a reopening investment theme, which "investors cannot ignore," the bank's European equity analysts, led by Ross A. MacDonald, said in a note published last week. As Covid-19 vaccines are rolled out and economies open up, Morgan Stanley's picks are "one of the few remaining sources of cheap cyclicality in Europe," its analysts said. Cyclical stocks are those tied to the economic cycle, which tend to do better when the economy improves. Here's the bank's full list of stock picks: Airbus is a pick for Morgan Stanley, which called it a "major beneficiary" of reopening once vaccines are distributed. "(We) view the company as well-positioned to gain share in a recovery," the bank said. Under its best-case — or "bull-case" — scenario, the bank gives the stock upside potential of 55%. Travel software company Amadeus is the bank's "top recovery play for 2021," as the airline industry looks to outsource and digitize. Morgan Stanley expects its revenue to be 13% higher in 2024 than it was in 2019, and estimated an upside potential of 84% for the stock in a bull scenario. Associated British Foods , owner of fast-fashion company Primark, has a "very strong" balance sheet, according to the bank. When Primark stores have re-opened between lockdowns there has been "strong" demand for the retailer, which does not have a transactional website. Morgan Stanley estimated a 46% upside potential for Associated British Foods in a bull case. Drinks maker Diageo is a pick for the bank, which said it is a "high quality way to get exposure to the 'reopening' theme," liking its premium focus. Organic sales are back to pre-Covid levels and Morgan Stanley's bull-case upside potential for the stock is 36%. Exhibitions company Informa has seen its share price fall 35% in the past 12 months, Morgan Stanley said, but the bank expects a "very substantial recovery" in 2022/23. The bank said its bull-case upside potential for Informa's stock is 38%. Airline component maker Meggitt has been "heavily" affected by the pandemic but the bank sees it as benefiting from a recovery in air traffic. The bank's bull-case upside potential for Meggitt is 35%. British bank NatWest is Morgan Stanley's top U.K. pick, as it is set to gain more market share in mortgages and is "well-positioned" to benefit from a reopening. Morgan Stanley estimates an upside potential of 40% in a bull case. Shell 's short-term financials are "more robust" than they have been for 15 years or more, Morgan Stanley said, and it expects net debt to be "much reduced" later this year. The bank estimates an upside potential of 35% in a bull scenario. Ryanair is "one of the winners of the recovery" because it will emerge from the pandemic owning most of its fleet, with a strong credit rating and a reducing cost base, according to the analysts. The bank estimates an upside potential of 30% in a bull case. Contract caterer Sodexo is part of a sector that will get back to normal faster than other hospitality suppliers because its customers are in education, health care and business, the bank said. Morgan Stanley liked its "strong" balance sheet and "resilient" business model and estimated an upside potential of 77% in a bull case.

Signage is displayed outside Morgan Stanley & Co. headquarters in the Times Square neighborhood of New York.

Michael Nagle | Bloomberg | Getty Images

Morgan Stanley has picked 10 "cheap" stocks set to benefit as countries get ready to relax their lockdown rules put in place during the coronavirus pandemic.

Its picks are part of its "best ideas" for a reopening investment theme, which "investors cannot ignore," the bank's European equity analysts, led by Ross A. MacDonald, said in a note published last week.

As Covid-19 vaccines are rolled out and economies open up, Morgan Stanley's picks are "one of the few remaining sources of cheap cyclicality in Europe," its analysts said. Cyclical stocks are those tied to the economic cycle, which tend to do better when the economy improves.

Here's the bank's full list of stock picks: