Investors may be feeling some market indigestion in August, but Morgan Stanley said there are still top stocks to buy settle down portfolios. The bank named a host of companies that it believes can weather the latest market weakness. CNBC Pro combed through recent Morgan Stanley research to find the well positioned stocks for August. They include: Apple , Keurig Dr Pepper , Elevance Health , Howmet and CBOE Global Markets. Keurig Dr Pepper Analyst Dara Mohsenian is getting even more bullish on shares of the beverage and coffee maker. “Our most significant change is doubling down on our recent upgrade to [overweight] at KDP by moving it to our top pick in beverages,” Mohsenian said recently. Keurig is coming off of a solid second-quarter earnings report in late July where it beat on both the top and bottom lines. “The stock narrative on KDP post Q2 upside and raised underlying FY guidance is playing out as we expected in our recent upgrade,” he wrote. Several positive catalysts remain, the firm says. A coffee inflection is likely ahead before year’s end, he while international remains strong, the analyst said. In particular, Morgan Stanley said it’s impressed by Keurig’s commitment to improve coffee fundamentals. Shares are down 5% this year, but the stock remains too compelling to ignore, according to Mohsenian. CBOE Global Markets “More irons in the fire to drive [an] upside surprise,” analyst Michael Cyprys said following the company’s mixed second-quarter earnings report earlier this month. CBOE, which operates exchanges including the Chicago Board Options Exchange, is beginning to fire on all cylinders, Cyprys said. Morgan Stanley gave several reasons in its earnings reaction note as to why CBOE is well-positioned as a top pick. They include growth initiatives that are in early stage development, an improving revenue outlook and operating leverage that’s likely to be positive in 2024, but isn’t yet priced in to shares. Product innovation is also percolating and Cyprys sees upside to estimates. For example, “in Europe, Cboe is moving ahead on the launch of single stock options on leading European companies, which is expected to come Nov. 2023,” he wrote. Cyprys added that the company’s index option products are “cash cows with pricing power & high incremental margins that are poised to benefit from broadening customer & user engagement…” Shares of the company are up almost 20% this year. Howmet Aerospace Meanwhile, shares of Howmet Aerospace are up over 25% this year, but the stock has plenty more room to run, according to Morgan Stanley. Analyst Kristine Liwag recently raised her price target on the aerospace component company to $60 from $50 after Howmet’s top and bottom lines beat earnings estimates in its latest quarter, reported earlier this month. “Given the company’s strong cash generation and quality balance sheet, we see further upside driven by increased capital return to shareholders,” she said. Howmet also has a great deal of pricing power as its supply chain continues to be constricted and parts remain in demand. “We continue to see Howmet as best positioned for the commercial aerospace upcycle from the increases in new aircraft build and spares,” she added. Further, Liwag says the production rate increases at Airbus and Boeing serve as near-term catalysts for the stock. The firm also says results are likely to top expectations and forward guidance will be raised through year end as management’s outlook has been very conservative. “Howmet is our top Aerospace Top Pick,” Liwag said. Apple “A Catalyst Rich Event Path Supports Apple As Our Top Pick. … .Catalysts to drive a re-rating in [next twelve months] include 1) a stronger iPhone 15 cycle, 2) reaccelerating Services growth, 3) underappreciated [gross margin] tailwinds, 4) new product launches, and 5) a potential hardware subscription launch.” Elevance Health “Amidst the multitude of current overhang risk factors impacting the broader Managed Care space, we are updating our Top Pick to Elevance as we believe the company is currently the cleanest story in Managed Care into 2024 with strong opportunity to achieve +12-15% EPS Growth in 2024 driven by Commercial and Medicare Advantage margin expansion, which heavily de-risks the company from a wide range of potential Medicaid Redetermination headwind scenarios.” Read more about this call here. Howmet Aeropace “Given the company’s strong cash generation & quality balance sheet, we see further upside driven by increased capital return to shareholders. … .We continue to see Howmet as best positioned for the commercial aerospace upcycle from the increases in new aircraft build & spares. … .We view management’s 2023 outlook as conservative, potentially setting up the company for a beat & raise through 2H23. …. .Howmet is our top Aerospace Top Pick.” CBOE Global Markets “More irons in the fire to drive [an] upside surprise. … .In Europe, Cboe is moving ahead on the launch of single stock options on leading European companies, which is expected to come [in] Nov. 2023. … CBOE’s proprietary index option products are cash cows with pricing power & high incremental margins that are poised to benefit from broadening customer and user engagement…” Keurig Dr Pepper “Our most significant change is doubling down on our recent upgrade to [overweight] at KDP by moving it to our top pick in beverages. … .The stock narrative on KDP post Q2 upside and raised underlying FY guidance is playing out as we expected in our recent upgrade. … .Compelling Valuation With Robust U.S. Refreshment Momentum and Coffee Inflection.”
