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Morgan Stanley: Investors should look at stocks that have been ‘eviscerated’ by lockdowns

Mohit Oberoi
Author: Mohit Oberoi

Last Updated: April 30, 2020

Morgan Stanley says investors should look at stocks that have been knocked flat by stalled business activity caused by the coronavirus pandemic.

The investment bank’s US equity strategist Mike Wilson said market followers should look at sectors that have been “completely eviscerated” by the health crisis, such as travel, retail, restaurants and live entertainment.

“We’re bullish overall, and we just think there’s more upside in potentially some of the laggard areas,” Wilson told CNBC’s Fast Money on Wednesday.

The S&P 500 is down around 14% this year, although some areas, such as cruise line operators are down around 70% in 2020.

However, big tech stocks have benefited from stay-at-home restrictions imposed by governments around the world. Alphabet and Apple largely held their ground while the US stock markets tumbled. Amazon and Netflix soared to record highs even as there was a bloodbath in markets.

Wilson said: “That’s not saying anything bad about Google or the largecap growth stocks. They’re wonderful companies. They’re wonderful business models, but they just don’t have the upside potential that some of these other laggard areas do.”

But the strategist warned against backing energy stocks at the moment.

He said: “I wouldn’t recommend diving back into energy given what’s going on there in the commodity markets.”

Earlier this month, West Texas Intermediate crude oil prices turned negative for the first time in history. Since then, crude oil prices have hovered at around $20 a barrel when most oil majors budget on making profits with oil at $40 a barrel.

On top of this energy exploration and production companies, are slated to lose a staggering $1trn in revenues in 2020, according to data by research firm Rystad Energy published on Thursday.

However, UK-based billionaire industrialist Gopichand Hinduja said earlier this week he expects crude oil to settle between $40-$50 per barrel after the pandemic, the near-term outlook looks bearish for the sector given low demand and lack of storage space.

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Mohit Oberoi

Mohit Oberoi is a freelance finance writer based in India. he has completed his MBA with finance as majors and also holds a CFA charter. He has over 13 years of experience in financial markets. He has been writing extensively on global markets for the last six years and has written over 6,500 articles. He mainly covers metals, electric vehicles, asset managers, and other macroeconomic news. He also loves writing on personal finance and topics related to valuation.