If you’re looking to increase your stock exposure, you might consider this list of stocks from Morningstar.
It includes stocks that are assigned wide moats (competitive advantages) by Morningstar analysts and are substantially undervalued compared to the analysts’ fair value estimates.
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Here’s the list, starting with the most undervalued stock as of March 24.
TransUnion (TRU), a credit reporting agency. Morningstar fair value estimate: $99. March 30 quote: $61.30
Comcast (CMCSA), the media/telecommunications giant. Morningstar fair value estimate: $60. March 30 quote: $37.25.
U.S. Bancorp (USB), the biggest U.S. regional bank. Morningstar fair value estimate: $58. March 30 quote: $35.35.
International Flavors & Fragrances (IFF), a specialty ingredients provider. Morningstar fair value estimate: $140. March 30 quote: $90.80
Western Union (WU), the money transfer service. Morningstar fair value estimate: $18. March 30 quote: $11.
Polaris (PII), a recreational vehicle maker. Morningstar fair value estimate: $175. March 30 quote: $108.
Wells Fargo (WFC), the big bank. Morningstar fair value estimate: $58. March 30 quote: $37.40.
Equifax (EFX), a credit reporting agency. Morningstar fair value estimate: $315. March 30 quote: $200.
Teradyne (TER), a provider of testing equipment for semiconductors: Morningstar fair value estimate: $167. March 30 quote: $107.75.
Veeva Systems (VEEV), a software provider for the life sciences industry. Morningstar fair value: $275. March 30 quote: $179.15.
Morningstar Analysis
Transunion: “Along with Equifax and Experian, TransUnion is one the Big Three consumer credit bureaus,” wrote Morningstar analyst Rajiv Bhatia.
“Given the fixed costs inherent in a data-intensive business, TransUnion has been able to generate meaningful margin expansion over the past several years.”
For now, “TransUnion's core business is selling credit reports to U.S. lenders, but as this business is the most mature, the company has sought other avenues of growth,” Bhatia said.
Comcast: “Comcast’s core cable business enjoys significant competitive advantages but will likely see growth slow as competition for incremental customers heats up,” wrote Morningstar analyst Michael Hodel.
“NBCUniversal isn’t as well positioned but holds unique assets, including core content franchises and theme parks, that should help ease the transition away from the traditional television business.”
Looking at the company as a whole, “we expect Comcast will deliver modest [revenue] growth with strong cash flow for the foreseeable future,” Hodel said.
U.S. Bancorp: Despite the recent problems for regional banks, “the sector still looks cheap,” wrote Morningstar analyst Eric Compton.
As for U.S. Bancorp, it “has been one of the most profitable regional banks we cover,” he said. “Few domestic competitors can match its operating efficiency and returns on equity over the past 15 years.”
To be sure, “while the bank has performed admirably, it … has had a hard time further optimizing efficiency and returns while some peers seem to be gradually catching up.”
The author of this story owns shares of Comcast, U.S. Bancorp and International Flavors & Fragrances.
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