a group of unicorn hunters are successfully acquiring companies without upsetting the market according to morgan stanley and their performance can turn conventional wisdom on its head there are 19 public companies that have acquired at least two unicorns —private companies with a valuation above 1 billion in the past decade equity strategist edward stanley said in a note to clients tuesday this group could acquire the top 30 unicorns or more than 800 smaller ones using just twotimes their netdebttoebitda ratio a measure of leverage this group of 19 has outperformed the broad s  p 500 index by 45 over the past five years and it has outperformed by 16 so far this year alone an especially strong performance considering the broad index was up about 138 in 2023 as of tuesdays close that outperformance can defy conventional market wisdom as investors typically prefer companies that focus on internal innovation over those that opt for buying private businesses because the latter can be more costly so whats driving this outperformance that flies in the face of expectation morgan stanley said these companies have a heavy bias toward technology and medical technology two areas that outperformed the broader market between 2018 and 2022 and since coming off recent lows in 2023 these companies have also been focused on free cash flow generation and deleveraging as opposed to topline growth in 2023 with this in mind stanley questioned whether unicorn hunting is a smart business strategy with the stocks recently not rewarded but stanley said the focus going forward should be on whether this group resumes merger and acquisition activity in coming quarters also important will be whether they can acquire unicorns at a reasonable price that benefits shareholders something stanley said has become more difficult because delayed structure raises and bridge rounds can push back valuation resets and this comes as the market for unicorns shifts following two years of tightening liquidity conditions the slide in unicorns is especially stark when considering what the market would look like without a boost from the excitement around artificial intelligence he said and stanley said the challenging landscape for unicorns has made it a buyers market those most at risk of seeing a valuation cut or being acquired are those that were named unicorns since 2020 when liquidity conditions were the easiest he added with this in mind stanley screened for unicornhunter companies that have acquired two in the last decade he also looked at the amount of dry powder companies would be able to deploy with a 25times current consensus fullyear levels for netdebttoebitda in mind heres 10 from stanleys list of those in the best position big tech stocks alphabet  amazon  microsoft and meta were among the stocks with the most money to leverage  apple was also among the best situated but was excluded from this list as the company has only made one such acquisition in the last decade big tech as a whole has rallied this year after the 2022 selloff as the outlook for growth stocks has improved amid growing optimism that their growth will be steady and will benefit from an eventual lowering interest rates some big tech names have also gotten a boost as investors grew excited around the role of artificial intelligence in business applications outside of traditional tech names johnson  johnson and merck represented the health sector both stocks have lagged the broader market and are down year to date cnbcs michael bloom contributed to this report a group of unicorn hunters are successfully acquiring companies without upsetting the market according to morgan stanley and their performance can turn conventional wisdom on its head there are 19 public companies that have acquired at least two unicorns —private companies with a valuation above 1 billion in the past decade equity strategist edward stanley said in a note to clients tuesday this group could acquire the top 30 unicorns or more than 800 smaller ones using just twotimes their netdebttoebitda ratio a measure of leverage this group of 19 has outperformed the broad sp 500 index by 45 over the past five years and it has outperformed by 16 so far this year alone an especially strong performance considering the broad index was up about 138 in 2023 as of tuesdays close that outperformance can defy conventional market wisdom as investors typically prefer companies that focus on internal innovation over those that opt for buying private businesses because the latter can be more costly so whats driving this outperformance that flies in the face of expectation morgan stanley said these companies have a heavy bias toward technology and medical technology two areas that outperformed the broader market between 2018 and 2022 and since coming off recent lows in 2023 these companies have also been focused on free cash flow generation and deleveraging as opposed to topline growth in 2023 with this in mind stanley questioned whether unicorn hunting is a smart business strategy with the stocks recently not rewarded but stanley said the focus going forward should be on whether this group resumes merger and acquisition activity in coming quarters also important will be whether they can acquire unicorns at a reasonable price that benefits shareholders something stanley said has become more difficult because delayed structure raises and bridge rounds can push back valuation resets and this comes as the market for unicorns shifts following two years of tightening liquidity conditions the slide in unicorns is especially stark when considering what the market would look like without a boost from the excitement around artificial intelligence he said and stanley said the challenging landscape for unicorns has made it a buyers market those most at risk of seeing a valuation cut or being acquired are those that were named unicorns since 2020 when liquidity conditions were the easiest he added with this in mind stanley screened for unicornhunter companies that have acquired two in the last decade he also looked at the amount of dry powder companies would be able to deploy with a 25times current consensus fullyear levels for netdebttoebitda in mind heres 10 from stanleys list of those in the best position