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Morgan Stanley adjusts its US Model portfolio

Published 2024/06/20, 23:02
© Reuters.

Investing.com - In a strategy update released on Thursday, Morgan Stanley made significant alterations to its US Model Portfolio.

The changes include adding Cummins Inc (NYSE:CMI) due to its cyclical leverage to improving order rates in transportation end markets and potential secular tailwinds from power generation demand due to advancements in artificial intelligence (AI).

They have also decided to remove QUALCOMM Inc (QCOM) as they believe the company's valuation effectively prices the underlying improvement in cyclical end markets and Edge AI opportunity.

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Cummins Inc (CMI) has been added to the portfolio for three main reasons. Firstly, CMI offers cyclical leverage from improvements in transportation end markets. Secondly, its exposure to the "powering Gen AI" theme provides secular growth tailwinds. Lastly, Morgan Stanley believes CMI trades at a reasonable valuation. As a large provider of power generation equipment, CMI is expected to benefit from increased content and structural demand tailwinds.

Morgan Stanley is removing QUALCOMM Inc (QCOM) from its portfolio as they believe the company's valuation effectively prices the underlying improvement in cyclical end markets and Edge AI opportunity. Since its addition to the portfolio in March 2021, QCOM has gained 83%, outperforming the S&P 500 benchmark which was up by 46% over the same period.

In addition to these changes, Morgan Stanley has also made risk management-driven adjustments to its portfolio. It has increased its internally held portfolio weights in Apple Inc (NASDAQ:AAPL), Tesla Inc (NASDAQ:TSLA), TransDigm Inc (TDG), Exxon Mobil Corp (NYSE:XOM), NVIDIA Corp (NASDAQ:NVDA), Becton Dickinson & Co (NYSE:BDX), and decreased its internally held portfolio weights in BlackRock Inc (NYSE:BLK), Visa Inc (NYSE:V).

These changes reflect Morgan Stanley's ongoing efforts to provide optimal returns for their clients, adjusting their strategies based on market trends and company performance. They highlight the importance of maintaining a well-balanced portfolio that is responsive to both cyclical and secular market trends.

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