Looking for the 'cheapest' global stocks? Morgan Stanley says there are lots to choose from

Published Tue, May 11 202110:00 PM EDT

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

Analysts at Morgan Stanley have picked a slew of stocks that look "cheap" compared to their global peers — and many have the potential to rise more than 20%, according to the bank. Europe has outperformed the MSCI All Country World Index (ACWI) since February, the analysts said, but relative valuations are still near 10-year lows. Morgan Stanley expects the region to get a further boost ahead of the summer as its economy emerges from the pandemic. Sectors such as autos, health and retail look "cheapest" when compared to global peers, the bank said in a note published Wednesday. Here are 10 of the bank's top picks, all with a potential upside of at least 20%: Telcoms British mobile network Vodafone is rated overweight by the Morgan Stanley analysts, who said the stock has a potential upside of 46%. They also chose German counterpart Deutsche Telekom , with an estimated upside of 43%. Potential upside refers to how much an analyst thinks the share price could rise. Food and retailing British grocer Tesco has a potential upside of 30%, according to the bank, while the upside for French retailer Carrefour is 21%. Irish food manufacturer Kerry Group and Associated British Foods both have a potential upside of 21%, the analysts said. Autos French auto parts supplier Valeo has a potential upside of 28%, according to Morgan Stanley. Valeo makes electrical components for cars, including advanced-driver assistance systems. Healthcare The analysts said French biotechnology firm Biomerieux has a potential upside of 34%, and put the figure at 31% for German pharmaceutical company Bayer . Swiss drug business Novartis has a potential upside of 30%, they added. "When compared to international competitors, Autos, Retailing, Health Care and Div Fins (diversified financials) look cheapest relative to history, while Transport, Utilities and Tech Hardware look richest," the analysts wrote. All of the stocks mentioned are on Morgan Stanley's list of "Overweight-rated European stocks that appear cheap relative to history versus global competitors." After a record rally over the past year, the analysts now expect "slower progress" globally but say Europe is still likely to outperform. "Europe's relative valuations still look low in a global context … Europe's PE (price-to-earnings-ratio) relative to (stock index) ACWI has rarely been lower over the last decade, and even adjusting for sector weights, Europe still looks cheap."

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Analysts at Morgan Stanley have picked a slew of stocks that look "cheap" compared to their global peers — and many have the potential to rise more than 20%, according to the bank.

Europe has outperformed the MSCI All Country World Index (ACWI) since February, the analysts said, but relative valuations are still near 10-year lows. Morgan Stanley expects the region to get a further boost ahead of the summer as its economy emerges from the pandemic.

Sectors such as autos, health and retail look "cheapest" when compared to global peers, the bank said in a note published Wednesday.

Here are 10 of the bank's top picks, all with a potential upside of at least 20%: