Morgan Stanley’s case for six Club names, including Alphabet and Microsoft

When evaluating stocks for the Club, we’re guided by our long-term mantra: Own companies that make stuff and do things at a profit. We hold the stocks of companies that showcase room for future cash-flow growth, are industry leaders with durable moats, and have strong balance sheets. In a research note Tuesday, Morgan Stanley identified its “best long-term picks” for 2025, in line with our approach for assessing companies. Analysts at the bank outlined the highest-quality companies within their sector of coverage, “based on the sustainability and quality of the business model, and opportunity to widen their competitive advantage.” Six names on Morgan Stanley’s list were Club holdings, all of which the firm rated a buy. Alphabet (GOOGL): Morgan Stanley analysts think artificial intelligence (AI) will create a new growth opportunities at Google parent Alphabet in its core products, including its search engine, YouTube and cloud offerings. The analysts predict “incremental Search revenue and share price potential” from “AI-driven search.” While developing its AI capabilities will require new investments, Alphabet is focused on getting more efficient at AI computing costs, the analysts said. This “builds confidence that margins won’t compress over the long-term.” Morgan Stanley has price target of of $135 per share on the stock. GOOGL 1Y mountain Alphabet (GOOGL) one-year performance. Costco Wholesale (COST): The wholesale retailer is “one of the best companies in all of retail,” according to Morgan Stanley — a view with which we strongly concur. Costco’s membership model is a point of strength for the company given its strong membership-renewal rates. Moreover, Costco’s private label brand, Kirkland Signature, “protects its position as a retailer with products found nowhere else,” the analysts wrote. The firm has a price target of $520 per share on Costco stock. Eli Lilly (LLY): The pharmaceuticals giant is well-positioned within the U.S. due to its strong pipeline of drugs and “robust new product cycles,” Morgan Stanley analysts argued. Lilly’s type-2 diabetes treatment, Mounjaro, is expected to “drive top-line growth and margin expansion through the next decade,” they added. At the same time, Mounjaro’s potential as an obesity treatment can make it a market-share gainer in the expanding GLP-1 injectable class, in which Lilly is effectively in a duopoly with Novo Nordisk (NVO). Morgan Stanley has a price target of $444 per share on Eli Lilly stock. Estee Lauder (EL): The high-end cosmetics company is well-positioned within its sector for “geographic growth trends” and “opportunities for meaningful margin expansion,” according to Morgan Stanley. Analysts at the bank are “confident in the sustainability of the post-Covid beauty rebound,” which should be boosted by China’s economic reopening and travel retail. Morgan Stanley has a price target of $281 per share on the stock. Linde (LIN): The industrial gas giant is an “underappreciated self-help story” that’s expected to deliver higher earnings-per-share growth, helped by its pricing power and under-levered balance sheet. The company is poised to continue to improve margins, which are already expanding in the Americas. Analysts at Morgan Stanley said Linde is also an attractive opportunity in the environmental, social and corporate governance (ESG) space, given its work on hydrogen-based clean energy projects. The firm has a price target of $365 per share on Linde stock. Microsoft (MSFT): The technology giant benefits from recurring revenue, 70% of which comes from its commercial businesses. And the company stands to gain from its significant investments in AI. “The accelerating pace of innovation around adding AI-powered capabilities into the portfolio with announcements including Microsoft 365 Copilot, Github Copilot, New Bing, and more, support momentum across the business and buttress durable growth,” the analysts wrote. Morgan Stanley has a price target of $307 per share on the stock. MSFT 1Y mountain Microsoft (MSFT) one-year performance. The Club’s take Morgan Stanley’s analysis reinforces the fact that many of our Club stocks are leaders in their fields and possess attractive long-term growth drivers. When we talk about ‘buying quality,’ this list of companies is the poster child of what it means. And, at the right price, each of these firms would continue to offer us a solid investment opportunity for the long haul. Morgan Stanley’s list offers important arguments for sticking with these high-quality names, and we’ll continue to look for buying opportunities in this volatile and uncertain market. (Jim Cramer’s Charitable Trust is long GOOGL,COST, EL, LLY, LIN, MSFT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.