Here is Morgan's Views on the Markets,
Earnings growth upgrades have definitely slowed down in recent weeks, although our estimates remain a tad ahead of the consensus. However, this has not prevented the sell-side consensus from turning more bullish on stocks. The mean consensus rating for the MS coverage universe has been on the upward trajectory after plummeting to a low in Jul-09, and is currently at a 24-month high and not too far from its April 2008 peak. On a relative basis versus July 2009, the positive conviction among the consensus appears to be stronger across the cap curve. Consensus seems to be most bullish on mega cap, mid-caps, and small caps. The overall conviction level has risen to 0.39 (wherein a stock rated as buy gets 1, hold gets 0, and sell gets -1) from 0.28 six months ago. We find that the consensus as well as MS have a “buy” or equivalent recommendation on 61% of our coverage universe considered for this study (versus 51% in Feb-10 and 32% in Jul-09).
Within the MS coverage universe, there are 35 stocks for which 70% or more of the Street has a “buy” or equivalent rating. MS analysts differ with the Street on 11 out of these 35 stocks. About half of these 35 stocks are in the Financials and Industrials. Similarly, there are only three stocks in which 60% or more of the Street has a “Sell” or equivalent rating (two in the telecoms sector and one in the materials sector). MS analysts’ ratings for these six stocks are no different from the Street’s
The sell-side consensus conviction on stocks is very strong. The opportunity, in our view, lies at the sector level with scope to take some contrarian bets versus the consensus view. Our strongest counter-consensus opinions are in Telecoms, Materials, and Financials.
