After dropping 25% from the beginning of the year through Oct. 12, the S&P 500 has rebounded 10% amid anticipation the Federal Reserve will lessen its interest-rate increases.
Despite the bounce-back, some stocks have fallen into undervalued territory, according to Morningstar. It bases that conclusion on its analysts’ fair value estimates. And it created a list of equities in that category
Morningstar screened for stocks it covers that were overvalued or fairly valued as of Sept. 30, but stood at least 10% under its fair value estimates as of Nov. 25. That left eight stocks standing. Morningstar analysts assigns six of these stocks a moat, or durable competitive advantage.
Here are the six picks:
Airbnb (ABNB): Morningstar analyst Dan Wasiolek gives the company a narrow moat and puts fair value for the stock at $117. It recently traded at $97.
“We think Airbnb's global online travel agency position will maintain over the next decade, driven by a leading alternative accommodation network (source of its narrow moat),” he wrote in a commentary.
Manhattan Associates (MANH): Morningstar analyst Dan Romanoff assigns the supply-chain software company a narrow moat and puts fair value for the stock at $155. It recently traded at $120.
“Manhattan Associates is the clear leader in the warehouse management systems software niche,” he wrote in a commentary. “We remain impressed with Manhattan’s smooth cloud transition as it progresses, with a third-quarter revenue increase of 17%.”
Palo Alto Networks (PANW): Morningstar analyst Malik Ahmed Khan gives the cybersecurity company a wide moat and puts fair value for the stock at $200. It recently traded at $166.
“Palo Alto's solutions are sticky,” he wrote in a commentary. “Palo Alto's leading platform approach for network security, cloud security, and security automation is spurring organizations to consolidate spending toward its products.”
Paycom Software (PAYC): Morningstar analyst Emma Williams assigns the human-resources software company a narrow moat and puts fair value for the stock at $388. It recently traded at $321.
“Paycom's unified platform appeals to mid-size and enterprise clients that prefer an all-in-one payroll and human capital management,” she wrote in a commentary. “The company's platform is supported by a single database, which … allows efficient software development and maintenance.”
Tesla (TSLA): Morningstar analyst Seth Goldstein gives the company a narrow moat and puts fair value for the stock at $250. It recently traded at $183.
“In less than a decade, the company went from a startup to a globally-recognized luxury automaker,” he wrote in a commentary. “The company also competes in the entry-level luxury midsize car and crossover SUV markets.”
West Pharmaceutical Services (WST): Morningstar analyst Karen Andersen assigns the medical supplies company a wide moat and puts fair value for the stock at $280. It recently traded at $223.
“West is the global market leader in primary packaging and delivery components for injectable therapeutics,” she wrote in a commentary. “Primary packaging is the material that first envelops a drug product, and safe production of drug-delivery packaging is critical for the successful delivery of pharmaceutical products.”
