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RESEARCH

5 Unexpected Investment
Ideas for 2024
Jan 31, 2024

Consider these contrarian views on key topics of

interest to investors, including airline demand,
copper supply, decarbonization’s investment
potential and more.

Key Takeaways

Airlines navigate capacity concerns in 2024,

bolstering revenue.

Sustainability improvers continue to provide

long-term investment potential.

Copper disruption is likely to result in a

deficit, rather than surplus.

India’s growth should edge China’s for the

fourth consecutive year.

Obesity drugs’ impact on consumer behavior

could bring opportunity to some food
companies.

As investors kick off 2024 amidst uncertain market

outlooks, tentative economic growth and
geopolitical turmoil, they have a lot of think about.
This level of noise can make it especially difficult to
uncover insights in the search for returns. In the
latest iteration of its annual “Big Debates” series1,
Morgan Stanley Research identified dozens of
topics buzzing across a variety of sectors and
regions where the firm’s views diverge from market
consensus. Here are five areas of key concern to
investors where we think the market may be
missing the full picture—and that could drive stock
markets, impact industries and shape the global
economy in 2024.

1. Airlines Are Gaining Altitude

Revenge spending was the big story when it came

to air travel in 2023, but the market isn’t sure that
demand can keep pace this year. In the U.S.,
investors appear worried that carriers will
overshoot, adding too many seats and routes as
consumers and businesses pull back on domestic
and international travel. That could undermine
ticket prices and ultimately the bottom line. But
Ravi Shanker, Morgan Stanley’s Freight
Transportation and Airlines Analyst, thinks leisure
and corporate travel will remain robust. He notes
that such factors as equipment delays, high fuel
costs and labor constraints will limit available
seats, allowing airlines to continue charging a
premium.

“Investors are worried that airlines will add

meaningful capacity growth in 2024,” says
Shanker. “However, our research shows that
airlines are actually trying to pare back growth
expectations, which should bode well for revenues
from ticket prices.”

Meanwhile, in Europe, investors are also worried

about soft demand and the effects of capacity
constraints. However, Morgan Stanley analysts
expect room for another solid year of revenue
growth for travel on the continent, despite potential
weakness in long-haul transportation, where
additional flights could strain pricing. Overall, these
trends could favor low-cost carriers but pose a risk
to flagship airlines.

2. Decarbonization Sustains Its

Investment Potential

Markets are taking a dim view of sustainable

investing’s growth potential, in part because of
what many see as slow progress on the transition
to renewable energy: Prices have gone up as
producers sought to hold on to profits amid high
interest rates, and some investors believe this will
spell lower customer demand in 2024. However,
Morgan Stanley Research thinks the impact of high
rates is baked into renewable energy prices, which
still provides better economics than, say, natural
gas. And companies should have more room in
their budgets to invest in expansion plans when
rates start coming down, expected in the second
half of the year. We like high-quality renewable
energy developers, which have seen unwarranted
drops in their valuations based on the market’s
negative view, but think small players could face
challenges.

More broadly, decarbonization to meet net-zero

targets remains a priority of governments around
the globe. As a result, measures such as tax credits
and subsidies provide long-term support to
sustainability as an investment theme. “We hold
firm to our ‘rate of change’ screen for sustainable
investing, focusing on companies delivering
incremental gains toward decarbonization,” says
Stephen Byrd, Morgan Stanley’s Global Head of
Sustainability and Clean Tech Research.

3. Tight Copper Is the New Normal

After a turbulent few years, disruptions to global

copper supply appeared to be moderating last year
and disruptions largely limited to Chile, where
drought and production delays hampered output of
the material crucial to energy transition. Most
investors seem to believe these constraints are in
the past, and some forecasts called for as much as
10% growth to pre-disruption production, pointing
to the delayed opening of a massive new mine in
Chile as well as ramp ups in Peru and Democratic
Republic of Congo. That scenario would push
copper into surplus territory for 2024. But Morgan
Stanley Research Commodity Strategist Amy Gower
and her team have a different take: “We think
disruption is here to stay. Rather than a glut, we
expect a deficit of 340 kilotonnes this year. This
disparity should show up in pricing by the second
quarter, with prices in London hitting our bullish
target of $9,000/tons, or roughly 8% higher than
2023.” A mine closure in Panama and significant
guidance downgrades from key producers are two
harbingers of accelerated disruption ahead. With
futures prices for the physical commodity at
historically higher levels than spot prices, investors
may look to equity opportunities, and specifically
miners with strong prospects for volume growth
and operational improvement.

4. India’s Run Continues

India is on track for a decade of phenomenal

growth, driven by three megatrends: global
offshoring, digitalization and energy transition. As
the world’s supply chains continue to realign in a
rewired global economy, India is poised to become
an attractive alternative for electronics
manufacturing, which could lead the sector to
expand by 21% a year to reach $604 million by 2032,
according to Morgan Stanley Research forecasts.

Despite this potential, investors are skeptical that

India can best regional peer China for the fourth
year in a row. They anticipate volatility from an
expected general election in the spring of 2024,
coinciding with an uplift in China markets from the
government’s efforts to stimulate the economy.
Morgan Stanley Research, however, favors India’s
growth picture and sees GDP growth—which they
forecast to be above 12% for 2024—more than
double that of China.

This also puts companies operating in India in a

better relative position to deliver earnings growth.
Therefore, investors who think that India’s outlook
is already priced into the market may want to
reconsider, says Ridham Desai, Morgan Stanley’s
Chief Equity Strategist for India. “The market seems
to be taking the view that Indian equities will level
down to subpar growth in 2024, but we think we are
only halfway through a profit cycle that will yield
20% compounding earnings growth over the next
four to five years.” Desai sees the start of a new
capital investment cycle, a healthy banking system,
lower corporate tax rates and improving balance in
trade and consumption among factors supporting
the upward trend.

5. Obesity Drugs Could Drive

Behavioral Shifts

Obesity drugs have taken the world by storm over

the past two years. Use of the innovative class of
hunger-suppressing medicines is growing, both for
weight management as well as to treat related
illnesses such as heart disease and diabetes. An
estimated 24 million people in the U.S., or 7% or the
population, will be taking these drugs by 2035,
according to analyst estimates.

Investors have recognized that changing consumer

behavior could pose a challenge to the food
industry, but appear to question whether obesity
drugs’ potential impact may be overblown. Morgan
Stanley Research, however, continues to expect that
obesity drugs will have broad and lasting
implications across food-related sectors as
consumers eat less and make more nutritious
choices. “This shift could eat into demand for
confections, baked goods, sweet and salty snacks,
alcohol, soft drinks and other unhealthier fare,”
says Morgan Stanley’s tobacco and packaged food
analyst Pamela Kaufman. “On the other hand,
companies with existing healthy options and those
with weight-management and energy-boosting
offerings should offer opportunity for investors as
the behavioral effects of obesity drugs unfold.”

1 For a complete look at Morgan Stanley

Research’s Big Debates for 2024, ask your
Morgan Stanley Representative or
Financial Advisor for the full reports,
which existing clients can access directly
here: Big Debates 2024|North America Big
Debates 2024|North America; Big Debate
s 2024|Europe; Big Debates 2024| AsiaBig
Debates 2024: Latin America.

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