Morgan Stanley's "Future Investment Methodology": Three main themes, three "20" principles
Morgan Stanley stated that currently, technology diffusion, decarbonization, and longevity are three key themes affecting global stock market volatility. The "Three 20s" principle refers to stocks with over 20% of revenue coming from a specific theme, market capitalization exceeding $200 billion, and expected revenue growth + EBITDA margin exceeding 20% by the fiscal year 2026
On September 4th, Morgan Stanley stock strategist Edward Stanley and his team released a report stating: "Currently, technology diffusion, decarbonisation, and longevity are three key themes affecting global stock market volatility."
Among them, technology diffusion refers to the spread and popularization of new technologies, such as cloud computing, artificial intelligence, 5G, etc.; decarbonisation refers to reducing carbon emissions to address climate change, with governments and companies around the world accelerating carbon neutrality plans; longevity refers to technologies related to extending human lifespan and improving health, such as gene therapy, precision medicine, etc.
The Edward Stanley team used the following "Three 20s Rule" to select stocks that meet the requirements from the three themes:
20% Rule: Each stock must have over 20% of its revenue coming from the respective theme.
20 Billion Rule: Each stock must have a market value exceeding $20 billion.
20 Rule: Each stock's expected revenue growth to fiscal year 2026 + EBITDA margin must exceed 20%.
In addition, each stock must receive a "buy" rating from Morgan Stanley analysts.
Subsequently, the Edward Stanley team ranked the output results based on the upside potential relative to the analyst benchmark target price, ultimately identifying 20 stocks in each of the three main themes.
According to the stocks derived from the above method, the Sharpe ratio is significantly higher than the market average, especially for stocks in the longevity theme