Credit Suisse's 4 Stocks With Huge Upside

BOSTON (TheStreet) -- The Credit Suisse Focus List, a compilation of U.S. stocks with outstanding return potential, has outperformed the S&P 500 in each of the past five years, an impressive feat. As of April, Focus List comprised 19 U.S. stocks, expected to rise between 4% and 75% over a 12-month timeframe. Here is a snapshot of the bank's four picks that currently offer the greatest upside. Below, they are ordered by potential return, from great to best.

4. Morgan Stanley (MS) has investment banking, trading and wealth management businesses.

Its stock has delivered annualized losses of 16%, over a three-year span. It failed to rebound as quickly as peer equities, such as those of Goldman Sachs (GS) and JPMorgan (JPM), because Morgan Stanley downsized its fixed income and commodities trading ahead of the recession and those businesses proved most lucrative during 2009, whereas Morgan Stanley's core strengths, merger advisory and wealth management, are only now demonstrating vigor.

CEO James Gorman is focused on strengthening the firm's core competencies and his financial record, thus far, inspires confidence. For 2010, his first full year at the helm, revenue advanced 27% and net income and earnings per share more than tripled. Recently, Barclays cut its first-quarter earnings estimates for both Morgan Stanley and Goldman, citing one-time items and lower trading and underwriting revenue. It believes that a disappointing first quarter will reset fiscal 2011 expectations and undercut the stocks. Credit Suisse has a different perspective.

The bank has a $35 target on Morgan Stanley, suggesting 26% of upside. The stock is notably cheap, costing just 8.9-times forward earnings, 0.7-times book value, 1.1-times sales and just 1-times cash flow, representing peer discounts of 36%, 61%, 59% and 92%, respectively. However, if the bears are correct, valuation is no reason to buy as bad news will surely precipitate a sell-off. Analysts forecast first-quarter earnings, at consensus, of 41 cents. That tally has been revised down by a noteworthy 29 cents in just four weeks, providing justification for caution.

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