The average U.S. stock is quietly getting crushed. Morgan Stanley says these ones are worth buying now.

Beneath the headline-level performance of major U.S. indexes, the average individual stock has been under meaningful pressure. Morgan Stanley attributes this to investors rotating away from broad swaths of the market — industrials among them — in favor of a narrower set of favored names. The result, the firm argues, is that some fundamentally sound companies are now trading at valuations that look attractive relative to their prospects.

The dynamic reflects a persistent feature of recent markets: index-level returns can mask significant divergence underneath. When capital concentrates in a handful of leaders, the median stock can lag badly even as headline benchmarks hold up.

For observers, the key question is whether this dispersion reflects durable business deterioration in the neglected segments or simply shifting sentiment. Morgan Stanley's view leans toward the latter, framing the selloff as an opportunity rather than a warning. What to watch: whether earnings and guidance from industrial and other out-of-favor companies confirm that fundamentals remain intact — or validate the market's caution.