Morgan Stanley says its Best Ideas are the New York-based investment bank's leading investment insights, presenting highly differentiated research, favorable risk-reward profiles and clear catalysts. The firm's stock-selection committee argues against reconstructing their picks as a portfolio, though, as each investment idea is chosen based on its own merit and without consideration of other picks.
Morgan Stanley is diligent in updating its selections. Last month, for example, Morgan Stanley removed ARM Holdings (ARMH) from Best Ideas after an impressive run in the stock. Morgan Stanley still gives ARM an "overweight" rating. Similarly, the bank still views Apple (AAPL) highly, although the firm deleted the stock from the list in December 2010.The following eight stocks currently on Morgan Stanley's list are arranged in order of potential upside, based on the firm's 12-month price target and closing prices as of May 11.
8. Union Pacific (UNP) Company Profile: Union Pacific operates the Union Pacific Railroad Co., offering freight transportation to 23 states in the U.S. Current Share Price: $103.97 (May 11) Potential Upside: 8% based on a price target of $112 Morgan Stanley's Take: Though Union Pacific missed consensus estimates for the first quarter due to fuel price lag impact and weather disruptions, the result was consistent with Morgan Stanley analyst William Greene's expectations heading into the quarter. Based on several positives through the end of 2011, including reaccelerating pricing, a reversal of the fuel surcharge impact, improving margins and a commitment by management to repurchase shares and raise the dividend, Greene says Union Pacific shares currently offer an attractive entry point for his longer-term thesis.