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What World-Class Hedge Funds Think About 5 Morgan Stanley’s Top Growth Stocks Through 2019

With most investors focused on the development of oil prices and the probability of further interest rate increased by the Federal Reserve this year, Morgan Stanley has commissioned its analysts to compile a list of 30 stocks to hold for the next three years. “We have tried to identify the best franchises, not the most undervalued stocks. Our driving principle was to create a list of companies whose business models and market positions would be increasingly differentiated by 2019,” Morgan Stanley said. Among the criteria used by analysts are the company’s ability to keep its competitive edge, cost efficiency and growth potential. In this article we’ll take a look at five of those 30 stocks and find out how do hedge funds like them.

By analyzing the equity portfolios of almost 800 top investors, we can see what stocks they are collectively bullish on and use this data to compile a portfolio that can outperform the market. We have determined through this process that the best strategy is to follow the 15 most popular small-cap picks among hedge funds, which have delivered an alpha of around 81 basis points per month in our backtests covering the period between 1999 and 2012 (see more details).

Servicemaster Global Holdings Inc (NYSE:SERV)

Nr. of Shares (as of December 31): 235,685

Value of Holding (as of December 31): $9.25 million

Hedge fund sentiment towards Servicemaster Global Holdings Inc (NYSE:SERV) has slightly cooled down during the fourth quarter, with the number of funds with long positions (among those we track) having decreased to 31 from 34 at the end of the third quarter. Billionaire Ken Griffin‘s Citadel Investment Group dumped approximately 35% of its holding over the quarter and held roughly 2.26 million shares of Servicemaster Global Holdings Inc (NYSE:SERV) at the end of December. Scott Mclellan and his fund, Marble Arch Investments, have only joined the party during the fourth quarter, having amassed 2.74 million shares of Servicemaster, the largest holding among the funds we follow. The company is set to announce 2016 first quarter results on May 4 and analysts are expecting revenues of $607 million and earnings of $0.39 per share, according to Yahoo! Finance. A provider of residential and commercial services, Servicemaster Global Holdings Inc (NYSE:SERV) has a market cap of $5.16 billion and is currently trading at a trailing Price to Earnings (P/E) ratio of 32.36, slightly lower than the industry average of 36.70 according to Yahoo! Finance.

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