These ‘all weather’ best-in-class stocks are a must-own as summer nears, Morgan Stanley says

Published Sat, Jun 3 20238:55 AM EDT

Morgan Stanley named a slew of must-own stocks this week that the firm said are firing on all cylinders ahead of summer. These companies have upside potential and shares have plenty of room to run in the months ahead, analysts said. CNBC Pro combed through Morgan Stanley's research to find the firm's best ideas this summer. They include Bath & Body Works , Take-Two Interactive, RBC Bearings, Thermo Fisher Scientific and American Express. Take-Two Interactive Morgan Stanley analyst Matthew Cost is getting even more bullish on shares of the videogame maker after a recent meeting with company management. The firm said it sees a slew of positive catalysts ahead for the stock including burgeoning margins, a robust pipeline and benefits from the use of generative artificial intelligence. "The Pipeline Looks Set to Drive A Record FY25, With Further Growth in FY26," he said. Cost said he's impressed by management's ability to concentrate on the present but also look ahead to the future. "On the topic of profitability, management reiterated their focus on investing for long term growth for both their existing major franchises, as well as new IP," he wrote. In addition, Take-Two is almost certain to be a major AI beneficiary, Cost said, allowing for "meaningful" productivity gains. "We believe TTWO is well positioned to continue seeing strong growth given best in class content and a large, engaged, and relatively under-monetized player base," he continued. Shares are up 32% this year. RBC Bearings "[The] growth story remains intact," analyst Kristine Liwag said of the aerospace and industrial bearings maker. Shares of the company are about flat this year, but Liwag sees major upside in the months to come. The firm also recently raised its price target on the stock to a Street high of $286 per share from $283. "We continue to view RBC Bearings as a high-quality industrials compounder with attractive growth and margin expansion potential," she wrote. RBC also reported earnings in late May that were better than expected on both the top and bottom line. "The key takeaways from the quarter were better than expected revenue growth, margins, and strong book to bill," Liwag said. The firm is also bullish on RBC's acquisition of Dodge Industrial, a mechanical power transmissions company. Liwag said the synergies leave RBC well-positioned for a steep growth trajectory. "RBC is a best in class operator with strong barriers to entry given its specialized products portfolio, often tailored to customer specifications, driving strong customer relationships," she said. Bath & Body Works Investors should remain calm and buy shares of the soap and fragrance retailer, analyst Alex Straton wrote recently. The firm recently lowered its price target to $61 per share from $76, but said that doesn't mean the stock is not an attractive buying opportunity. "BBW has credible L-T topline growth drivers in: existing categories, the digital channel, and internationally, the firm said. Bath & Body Works also delivered a robust top and bottom line beat in late-May and that should give investors confidence, Straton said. "We left the 1Q print with further conviction in BBWI's path back to 20%+ EBIT margin (arguably the key debate on the stock), & continue to see room for ongoing beats & raises throughout the year," she wrote. However, "investors likely need to be patient," she added. The company will need to prove it can go back to its pre-Covid profitability and margin expansion. "With 20% margin in sight as well as likely continued beats & raises ahead, we think the stock could be awarded the re-rating we think it deserves," she concluded. Shares are down 10.5% this year. Take-Two Interactive "The Pipeline Looks Set to Drive A Record FY25, With Further Growth in FY26. … On the topic of profitability, management reiterated their focus on investing for long term growth for both their existing major franchises, as well as new IP. … Similar to their commentary at F4Q, mgmt is confident that AI can drive meaningful productivity gains in the game industry & for TTWO specifically. … We believe TTWO is well positioned to continue seeing strong growth given best in class content & a large, engaged, and relatively under-monetized player base." American Express Platinum stock at an attractive entry point. … Amex hasn't traded this cheaply on P/E since 2019, with a 12x P/E pricing in a sharper slowdown in growth. Yes, discretionary spend is slowing, but this is already baked into consensus estimates. From here, AXP offers 1) highest revenue growth, 2) strong operating leverage, 3) better credit quality. … Credit Quality Best in Class Among Card Issuers." Read more about this call here. Thermo Fisher Scientific "Investor Day Spotlights 'All weather' execution; Reiterate OW/Top-Pick. ... While the financial details provided at the Investor Day weren't surprising, we came away confident in TMO's ability to outpace market growth & gain share driven by recent & upcoming launches of innovative products, 'trusted partner' status & a robust commercial engine. Driven by end market strength & share gains in Biopharma & emerging markets, we expect TMO to meaningfully outpace peers, with diversification and scale embedding best-in-class resilience & flexibility." Bath & Body Works "BBW has credible L-T topline growth drivers in: existing categories, the digital channel, and internationally. … We left the 1Q print with further conviction in BBWI's path back to 20%+ EBIT margin (arguably the key debate on the stock), & continue to see room for ongoing beats & raises throughout the year. … But investors likely need to be patient. … With 20% margin in sight as well as likely continued beats & raises ahead, we think the stock could be awarded the re-rating we think it deserves." RBC Bearings "[The] growth story remains intact. … We continue to view RBC Bearings as a high-quality industrials compounder with attractive growth and margin expansion potential. …. The key takeaways from the quarter were better than expected revenue growth, margins, and strong book to bill. … RBC is a best in class operator with strong barriers to entry given its specialized products portfolio, often tailored to customer specifications, driving strong customer relationships."