Alcoa
Ticker: AA
Market cap: $7.8 billion
Price target: $57
Rationale: "After a post-2Q18 sell off, we see compelling valuation and a constructive 4Q18 setup."
Source: Morgan Stanley
American Axle
Ticker: AXL
Market cap: $2 billion
Price target: $22
Rationale: "AXL plans to drive leverage down from ~3x to ~2x by the end of 2019, with the potential for share buybacks in 2020+."
Source: Morgan Stanley
Caterpillar
Ticker: CAT
Market cap: $84 billion
Price target: $187
Rationale: "With trade and peak cycle fears overblown and ~30-40% of the portfolio at trough, we see an attractive set up."
Source: Morgan Stanley
Ford
Ticker: F
Market cap: $37 billion
Price target: $15
Rationale: "F represents a cheap call option on restructuring, trucks, data, and SOTP potential."
Source: Morgan Stanley
Honeywell
Ticker: HON
Market cap: $122 billion
Price target: $175
Rationale: "HON represents a long-term rerating opportunity as the company spins out slower growth assets and emphasizes tech differentiation, creating a 2x GDP growth algorithm in a sector where growth is increasingly scarce."
Source: Morgan Stanley
Knight-Swift
Ticker: KNX
Market cap: $6.4 billion
Price target: $55
Rationale: "KNX's current risk reward is very attractive given favorable cyclical trends (upcoming peak season and difficult driver market), potential upside to SWFT turnaround synergies, and cheap valuation (KNX is trading at 2008/09 recession levels)."
Source: Morgan Stanley
Southwest Airlines
Ticker: LUV
Market cap: $36 billion
Price target: $67
Rationale: "High quality characteristics (above-average margins, shareholder friendly approach, IG B/S) are intact."
Source: Morgan Stanley
United Technologies
Ticker: UTX
Market cap: $107 billion
Price target: $160
Rationale: "Given the rising potential for a restructuring, option value for the GTF, and accretion from M&A, we remain constructive on UTX."
Source: Morgan Stanley