BHI) has risen 30%. Bank of America ( BAC) has fallen 30%. Celgene ( CELG) has increased 0.1%. Danaher ( DHR) has climbed 37%. Hewlett-Packard ( HPQ) has dropped 9%. Suncor Energy ( SU) has advanced 4.6%. Textron ( TXT) has appreciated 30%. Union Pacific ( UNP) has soared 58%. Walt Disney ( DIS) has increased 36%. In sum, five of the original nine picks have outperformed the S&P 500. Here is a look at Morgan Stanley's eight Best Ideas heading into 2011. Below, the stocks are ordered by their predicted upside, from modest to mammoth.
8. BorgWarner ( BWA) manufactures and sells engineered automotive systems. Fundamentals: BorgWarner's 12-month sales have soared 44%. Third-quarter profit quintupled to $107 million, or 87 cents a share, as revenue grew 37% to $1.4 billion. The operating margin widened from 2.5% to 8.7%. BorgWarner has $432 million of cash and $1.3 billion of debt, equal to a quick ratio of 1.1 and a debt-to-equity ratio of 0.5. Management is forecasting $2.3 billion of net new powertrain business between 2011 and 2013. Valuation: The stock trades at a trailing earnings multiple of 25, a forward earnings multiple of 18, a book value multiple of 3.4 and a cash flow multiple of 17, 28%, 46%, 76% and 41% discounts to auto components peer averages. Its PEG ratio, a measure of value relative to growth, of 0.1 reflects a 90% discount to estimated fair value. Morgan Stanley's bullish scenario entails a 51% stock-price rise to $100. Its bear-case target is $45.
-- Written by Jake Lynch in Boston.To see these stocks in action, visit the Morgan Stanley's 8 Best Stock Ideas Portfolio on Stockpickr.
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