Morgan Stanley highlighted three European Capital Goods companies as its top Overweight selections, pointing to increasing interest from global funds in businesses exposed to artificial intelligence and electrification themes.
Schneider Electric remains the most broadly held stock among European Capital Goods names, with 53% of European long-only funds carrying overweight positions. That level of ownership has been essentially unchanged for the last eighteen months. A more consequential shift has been the rapid narrowing of the ownership gap by global funds - 48% of global funds are now overweight versus a substantially smaller share in 2024. Morgan Stanley noted that hedge funds, which have reportedly trimmed exposure, could become net buyers if Schneider demonstrates stronger price-cost management when it reports first-half 2026 results. The analysts reiterated their FY26 EBITA margin guidance of 19.1-19.4% for the company.
ABB is portrayed by Morgan Stanley as the most structurally under-owned large-cap name in the Electricals group. The share of European long-only funds with overweight positions in ABB has remained in the 10-15% range over the past three years, a marked discount relative to peers where between 38% and 53% of funds hold overweight positions. Morgan Stanley cautioned that part of this under-ownership may be a data cutoff issue: ABB shares have rallied roughly 37% year-to-date, and about 33 percentage points of that total gain occurred after the March 31 data cutoff used in the fund ownership figures.
Siemens Energy has recorded a pronounced turnaround in its footprint within European long-only portfolios. The proportion of funds holding overweight positions rose from 18% a year ago to 41% currently, moving it ahead of Siemens AG and Legrand, both at 38%. Morgan Stanley acknowledged that Siemens Energy trades at a premium valuation - an implied 2026 EV/EBITA of roughly 30x - but considers this premium justifiable given its forecast of a 22% EBITA compound annual growth rate over 2027-2030. The firm maintained Siemens Energy as a key Overweight pick.
The bank's selections reflect its view that investor appetite is shifting toward companies with clear exposure to AI and electrification trends. Morgan Stanley's analysis combines fund ownership data with recent share price moves and company-level margin and growth expectations to identify stocks that may attract additional long interest from global managers.
Investors should note that ownership metrics can lag rapid share-price appreciation and that near-term company results and margin delivery will influence whether currently reduced investors increase holdings.