Avoid high beta, don't obsess with quality: Morgan Stanley

Moneycontrol Bureau

Brokerage house Morgan Stanley feels investors are gradually shifting to cyclical stocks, and moving away from defensive stocks.
"Market is paying greater attention to EPS growth as well as to capex and financial leverage, unlike the market’s leaning for quality (high return on equity, low capex, high free cash flow and low financial gearing) since 2008. These are early shifts from a pro-defensive to a pro-cyclical bias, and we expect them to deepen," says the Morgan Stanley note to clients.
"However, investors should not confuse these shifts with buying beta (stocks that move sharply in a rising and falling market); they should also be distinguished from value styles. Value continues to be a losing style, as it has been for the past five years," the Morgan Stanley note says.
The brokerage's theme for the current calendar is reasonably priced growth.
"We think quality factors will continue to lose ground as the economy troughs and growth becomes more broad based," says the Morgan Stanley note.
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