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The following is a list of top seven stocks which Morgan Stanley bought in the last quarter according to its latest 13F filing with SEC.

Stock

Symbol

Shares Held - 06/30/2011

Shares Held - 09/30/2011

Change in shares

Microsoft Corporation

MSFT

0

66058566

66058566

Simon Property Group Inc.

SPG

0

9815045

9815045

Philip Morris International Inc.

PM

0

16657482

16657482

Procter & Gamble Co.

PG

0

16013635

16013635

Mead Johnson Nutrition Company

MJN

0

13865393

13865393

Vale S.A.

VALE

0

41478892

41478892

Express Scripts Inc.

ESRX

11625420

36058859

24433439

My favourite long candidate among above stocks is Simon Property Group, Inc. Simon Property Group, Inc. is a real estate company. Simon owns or has an interest in 392 retail real estate properties, including regional malls, Premium Outlets, The Mills, community/lifestyle centers and international properties comprising 263 million square feet of gross leasable area in North America, Europe and Asia. Simon’s EPS forecast for the current year is $6.86 and next year is $7.25. According to consensus estimates, its topline is expected to grow 7.80% in the current year and 4.30% next year.

Simon’s is trading at a forward PE of 16.94 and has an attractive dividend yield of 2.90%. Simon’s US business is showing consistent growth with annual rent increases and steady demand. Simon’s posted strong last quarter results, announced a $4bn debt facility at an attractive LIBOR+100bp, and exercised its first refusal rights to acquire 96% of King of Prussia mall.

Going forward, Simon’s growth will primarily be through its outlet developments in markets including the US, Japan, South Korea, Malaysia and Canada. SPG's expected development & redevelopment spending stands at around $500M and around $1 billion in 2011/2012, respectively. Luxury retail also continues to outperform, which bodes well for SPG's mall portfolio.

Although the stock has appreciated over 23% YTD outperforming its peers, its valuations doesn’t seem unreasonable. The shares are trading at a discount to large cap apartment and office names and in-line with large cap. healthcare REITs. It is also roughly in-line with TCO despite having diversification benefits and a high growth Premium Outlets business. I see a further upside to the valuations.

Microsoft Corporation is another interesting long candidate in the above list. Microsoft is engaged in developing, licensing and supporting a range of software products and services. The company also designs and sells hardware, and delivers online advertising to customers. It operates in five segments: Windows & Windows Live Division, Server and Tools, Online Services Division, Microsoft Business Division, and Entertainment and Devices Division. Microsoft’s EPS forecast for the current year is 2.85 and next year is 3.13. According to the consensus estimates, its top line is expected to grow 6.50% in the current year and 6.90% next year. It is trading at a forward P/E of 8.61. Out of 33 analysts covering the company, 23 are positive and have buy recommendations, one has a sell recommendation and nine have hold ratings.

I find Microsoft a very attractive medium-term buy at 8.61x next year's EPS. At these levels, I don’t think the market is pricing in any of the positive initiatives the company is taking. Some of the important initiatives that can drive meaningful growth over the next one year are the Windows 8 launch, Office 365, which is gaining traction, and good adoption of Nokia's (NOK) WP7 phones. In addition, Microsoft’s excess cash position provides a downside cushion. Microsoft recently raised its dividend by 25% and it has significant potential to increase its dividend pay-out ratio further to support the stock. I think Microsoft offers an attractive risk reward for investors who can hold the stock for the next year.

Source: Morgan Stanley: 7 Recent Buys