After the stock market’s surge last year, with the S&P 500 jumping 24%, you might think all the bargains are gone. But that’s not the case, according to Morningstar.
“While we forecast that the rate of economic growth will slow [this year] and stocks … are nearing their highs, we still see multiple undervalued areas that provide relatively large margins of safety,” said Morningstar Chief U.S. Market Strategist David Sekera.
Morningstar offered a list of its top 33 undervalued stocks for the first quarter of 2024. It measures valuation according to its fair value estimates. Here are 10 of the best known stocks from the list.
1. Charles Schwab (SCHW) -)
Morningstar moat (durable competitive advantage): wide. Morningstar fair value estimate: $80. Thursday closing price quote: $66.90.
“In the medium to long term, Charles Schwab should see significant growth in earnings,” wrote Morningstar analyst Michael Wong. “Third-quarter results showed stabilization in revenue that had been trending downward.”
He said, “the largest medium-term drivers of earnings will be Schwab paying down its high-cost supplemental funding and expense savings.”
2. Comcast (CMCSA) -)
Morningstar moat: wide. Morningstar fair value estimate: $60. Thursday closing price quote: $42.65.
3. Estee Lauder (EL) -)
Morningstar moat: wide. Morningstar fair value estimate: $200. Thursday closing price quote: $138.70.
4. Exxon Mobil (XOM) -)
Morningstar moat: narrow. Morningstar fair value estimate: $123. Thursday closing price quote: $102.30.
5. Hasbro (HAS) -)
Morningstar moat: narrow. Morningstar fair value estimate: $88. Thursday closing price quote: $48.35.
“Hasbro continues to hold a leading position in the North American toy industry, developing, manufacturing, and marketing well-known global brands,” wrote Morningstar analyst Jaime Katz.
“The firm operates a differentiated business model, thanks to its digital properties exposure, content creation ability, and key licensing arrangements.”
Cereal, Payments, Telecommunications
6. WK Kellogg (KLG), the cereal portion of the former Kellogg
Morningstar moat: none. Morningstar fair value estimate: $27. Thursday closing price quote: $13.30.
7. PayPal (PYPL) -)
Morningstar moat: narrow. Morningstar fair value estimate: $135. Thursday closing price quote: $58.45.
“The company is seeing some headwinds, as the positives from the pandemic reverse and the macroeconomic situation worsens,” wrote Morningstar analyst Brett Horn.
But, “management is attempting to combat the pressure on top-line growth with a greater focus on margin improvement. And we see this evolution as the right move.”
8. Verizon Communications (VZ) -)
Morningstar moat: narrow. Morningstar fair value estimate: $54. Thursday closing price quote: $39.35.
9. Walt Disney (DIS) -)
Morningstar moat: wide. Morningstar fair value estimate: $115. Thursday closing price quote: $90.55.
10. Wells Fargo (WFC) -)
Morningstar moat: wide. Morningstar fair value estimate: $55. Thursday closing price quote: $49.30.
The author owns shares of Comcast, Exxon, PayPal, Verizon and Disney.
