Stocks to rise on Morgan Stanley’s dollar call

When the biggest investment banks in the financial market guide Main Street into a strategy, they usually do so in a subtle way to test the waters. If there’s a lot of traction behind the idea, they’ll pull out the “big guns” in a wave of content, guest interviews, or other ways to get more mind-set and capital behind a recommendation.

Today, those on Morgan Stanley NYSE: MS have Recommended investors sell dollars. Now, this is an open-ended recommendation that conflicts with ideas about the new Potential trade tariffs being proposed by the newly elected United States administration. However, when investors zoom out and examine price action in other asset classes away from currencies, such as bonds and commodities, it is very clear that the market wants a lower dollar.

Also, as judged by the manufacturing PMI index, Construction sector Now in a 25-month contraction, and only one less dollar could bring it back to life. This is why investors can look into stocks such as Caterpillar Inc. NYSE: CAT As a net exporter or Occidental Petroleum Company NYSE: OxyBecause the demand for oil will increase in low dollar Energy field. finally, Alibaba Group NYSE: baba Rides the high valuations that foreign stocks enjoy from the low dollar in every cycle.

Why a weak dollar could boost Caterpillar stock’s growth potential

As a US manufacturer and net exporter, Caterpillar could see sales improve if the dollar weakens. A stronger foreign currency against the dollar increases buyers’ purchasing power, enabling them to place larger orders with Caterpillar than they can today.

This is always the fundamental reason behind the better performance of industrial stocks. A weaker domestic currency triggers new orders for durable goods needed by other countries, boosting earnings and stock prices. Because Morgan Stanley analysts call for this trend, the folks at JPMorgan Chase decided to get ahead of the pack and recommend Caterpillar stock.

As of December 2024, these analysts have placed their Overweight rating on the company, which is A. $515 price target for Caterpillar stock. To justify these new ideas, the stock would have to rise 30.3% from where it trades today, showing retail investors just how much traction this currency shift could have on the company.

In addition to these analysts, some institutional buyers are piling into Caterpillar stock today. Allocators at Geode Capital Management decided to increase their holding in the company by 0.7% till November 2024, making their net position Today is a high of $4 billionor 2.1% ownership in Caterpillar.

How Rebounding Manufacturing Activity Could Boost Oil Prices and Boost Occidental Petroleum Stocks

A lower dollar and a potential rebound in manufacturing activity within the United States could lead to a new wave of oil demand to accommodate the production and transportation of raw materials and finished goods. Knowing this, Warren Buffett has accumulated up to 29% of Occidental Petroleum’s stock.

And it is not just a simple value play, because he is selling other names in the portfolio, viz Apple Inc. NASDAQ: AAPL And Bank of America Co. NYSE: BACleading the markets to think that there may be a wider perspective and opinion behind his decision.

Either way, Occidental Petroleum stocks are a value play, especially since oil prices have struggled to stay above $70 a barrel for this long. Compared to its average price-to-earnings (P/E) valuation of more than 30.0x historically, today’s 13.3x multiple would make this stock an interesting bargain to watch. This is why analysts feel very comfortable bullish on the stock.

As of November 2024, Raymond James analysts decided to keep their strong buy ratings on Occidental Petroleum stock while $78 a-share valuation on the company. Compared to today’s stock price, this scenario represents a net upside of 60.8% from where the stock is today.

A decline in the dollar fueled foreign stock gains, with Alibaba leading the pack today

Mega investors like Michael Burry and David Tepper have found plenty of reason to build Alibaba makes its largest holding stock in their respective funds. While some considerations may justify a very high valuation on the company, it all boils down to where the dollar trades today and where it could trade tomorrow.

If Morgan Stanley’s analysts are correct in calling for a weaker dollar, foreign stocks (pegged to dollar volatility) will rally, as will any dollar-quoted commodity that rises when the dollar falls.

Knowing that this is correct and that the stock is as cheap as it is today, management has a $25 billion stock repurchase program For Alibaba shares.

What’s more, this is why Macquarie’s analysts encourage Alibaba to outperform from a neutral rating by October 2024. Alibaba is valued at $145 per share This conclusion hasn’t changed since today and the rating came out, a situation that means the stock is trading 61.2% higher today.

As a final gauge of this trend, investors can double check $5.5 billion institutional capital who entered Alibaba in the last 12 months.

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