Stars & Stripes: 33 Undervalued US Stocks

Here’s
how
stock
market
valuations
look
through
a
few
different
lenses:

• By
  investment
  style,
  small-value
  stocks
  are
  the
  most
  undervalued
  stocks
  right
  now,
  trading
  26%
  below
  our
  fair
  value
  estimate.
  Meanwhile,
  large-
  and
  mid-cap
  growth
  stocks
  are
  8%
  overvalued.
• By
  sector,
  industrials,
  technology,
  financial
  services,
  and
  consumer
  defensive
  stocks
  look
  most
  overvalued.
  The
  most
  undervalued
  sectors
  heading
  into
  the
  second
  quarter
  are
  real
  estate,
  utilities,
  and
  communication
  services.
• By
  
  Morningstar
  Economic
  Moat
  Rating,
  which
  is
  a
  sign
  of
  a
  company’s
  competitive
  advantages,
  wide-moat
  stocks
  are
  overvalued
  by
  4%,
  while
  narrow-
  and
  no-moat
  stocks
  are
  about
  fairly
  valued.

33
Undervalued
Stocks
to
Buy
for
Q2
2024

Here’s
the
list
of
Morningstar’s
top
underpriced
stock
picks
for
the
second
quarter
of
2024.

1. Adobe
   
   ADBE
2. Albemarle
   
   ALB
3. APA
   
   APA
4. Cognizant
   Technology
   Solutions
   
   CTSH
5. Comcast
   
   CMCSA
6. Crown
   Castle
   
   CCI
7. Dow
   
   DOW
8. Duke
   Energy
   
   DUK
9. Entergy
   
   ETR
10. Federal
    Realty
    Investment
    Trust
    
    FRT
11. FMC
    
    FMC
12. Hanesbrands
    
    HBI
13. Illumina
    
    ILMN
14. Kraft
    Heinz
    
    KHC
15. MarketAxess
    Holdings
    
    MKTX
16. Moderna
    Therapeutics
    
    MRNA
17. NiSource
    
    NI
18. PayPal
    Holdings
    
    PYPL
19. Realty
    Income
    
    O
20. Schlumberger
    
    SLB
21. Sealed
    Air
    
    SEE
22. Stericycle
    
    SRCL
23. STMicroelectronics
    
    STM
24. TC
    Energy
    
    TRP
25. Tyson
    Foods
    
    TSN
26. Under
    Armour
    
    UA
27. U.S.
    Bancorp
    
    USB
28. VF
    
    VFC
29. Ventas
    
    VTR
30. Warner
    Brothers
    Discovery
    
    WBD
31. Wesco
    International
    
    WCC
32. WK
    Kellogg
    
    KLG
33. Zimmer
    Biomet
    
    ZBH

Here’s
a
brief
summary
of
how
valuations
stack
up
across
sectors,
along
with
some
key
Morningstar
metrics
about
each
undervalued
stock
to
buy.
Individual
stock
data
is
as
of
March
31,
2024.

Undervalued
Basic-Materials
Stocks

Basic-materials
stocks
have
underperformed
the
broader
so
far
in
2024
and
are
fairly
valued
heading
into
the
second
quarter.
Morningstar
strategist

Seth
Goldstein
reports
that
60%
of
the
stocks
that
Morningstar
covers
in
the
sector
are
trading
with
Morningstar
Ratings
of
4
or
5
stars.
While
building-materials
stocks
look
overvalued,
more
than
half
of
the
stocks
in
the
agriculture,
chemicals,
and
metals
and
mining
industries
are
underpriced.

Underpriced
Communications-Services
Stocks

The

communication-services
sector
performed
in
line
with
the
broad
market
during
the
first
quarter.
The
sector
enters
the
second
quarter
of
2024
trading
6%
below
our
fair
value
estimate.
While
heavyweight
Meta
Platforms

META
has
continued
to
soar
this
year,
there
is
plenty
of
opportunity
in
the
sector,
observes
Morningstar
sector
director

Mike
Hodel.
In
particular,
more
than
three
fourths
of
the
stocks
we
cover
in
the
telecom
subsector
are
trading
in
4-
and
5-star
range.

Cheap
Consumer
Cyclical
Stocks
Today

Consumer
cyclical
stocks
underperformed
the
broader
market
during
the
first
quarter.
The
sector
enters
the
second
quarter
of
2024
trading
2%
below
our
fair
value
estimate.
Less
than
half
of
the
stocks
that
we
cover
in
the
sector
are
trading
in
4-
and
5-star
range,
says
Morningstar
sector
director

Erin
Lash.
The
auto,
apparel,
and
travel
and
leisure
industries
hold
the
most
opportunities
from
a
valuation
perspective.

Undervalued
Stocks
in
the
Consumer
Defensive
Sector

Consumer
defensive
stocks
lagged
the
market
during
the
first
quarter.
The
sector
looks
6%
overvalued
heading
into
the
second
quarter
of
2024.
Yet
there
are
opportunities
to
be
found,
says
Morningstar’s
Lash:
In
particular,
nearly
half
of
the
stocks
we
cover
in
the
consumer
packaged
goods
industry
are
trading
in
4-
and
5-star
range.
All
of
the
tobacco
stocks
we
cover
look
undervalued,
too.

Underpriced
Energy
Stocks
Right
Now

Energy
stocks
outperformed
the
broader
market
during
the
first
quarter
as
oil
prices
rose.
We
expect
the
US
production
growth
curve
to
flatten
further
in
2024,
says
Morningstar
sector
strategist

Stephen
Ellis.
The
energy
sector
looks
about
3%
undervalued
today.
About
half
of
the
names
we
cover
in
the
drilling
and
integrated
oil
and
gas
industries
look
undervalued.

Undervalued
Stocks:
Financial
Services

The
financial-services
sector
has
outperformed
the
broad
market
so
far
in
2024;
the
sector
is
6%
overvalued
at
the
start
of
the
second
quarter.
However,
more
than
half
of
the
bank
stocks
we
cover
are
trading
at
4-
and
5-star
levels,
notes
Morningstar
sector
director

Michael
Wong.
Over
the
medium
term,
we
expect
balance
sheet
changes
to
offset
some
of
the
pressure
from
lower
interest
rates,
he
concludes.

Top
Cheap
Healthcare
Stocks

Healthcare
stocks
underperformed
during
the
first
quarter
of
2024,
yet
as
a
group
are
trading
1%
above
our
fair
value
estimate.
Opportunities
do
exist,
particularly
in
the
biotech
industry,
as
well
as
among
providers
and
services,
healthcare
plans,
and
drug
manufacturers,
reports
Morningstar
sector
director

Damien
Conover.
We
don’t
think
the
market
fully
appreciates
the
innovation
in
the
biotech
and
drugmaker
group,
in
particular.

Inexpensive
Industrials
Stocks

Industrials
stocks
slightly
outperformed
the
broader
market
during
the
first
quarter
of
2024
and
look
13%
overvalued
today.
Morningstar
sector
director

Brian
Bernard
reports
that
isolated
investment
opportunities
remain
in
the
aerospace
and
defense,
farm
and
heavy
construction
machinery,
and
waste
management
industries.

Overlooked
Real
Estate
Stocks
to
Buy

Real
estate
stocks
finished
the
first
quarter
of
2024
in
the
red
and
currently
trade
at
an
11%
discount
to
our
fair
value
estimate.
More
than
half
of
the
names
in
the
sector
are
trading
in
either
the
4-
or
5-star
range,
says
Morningstar
senior
equity
analyst

Kevin
Brown.
We
expect
rental
rate,
revenue,
and
net
operating
income
growth
to
remain
positive
in
2024.

Undervalued
Technology
Stocks
for
2024

Technology
stocks
continued
to
win
big
in
the
first
quarter,
outperforming
the
broad
market.
The
tech
sector
looks
8%
overvalued
heading
into
the
second
quarter
of
2024.
Morningstar
senior
analyst

Dan
Romanoff
says
there
are
a
few
but
not
many
buying
opportunities
in
semiconductors,
hardware,
and
software.
We
think
the
most
important
catalyst
for
the
sector
in
2024
revolves
around
generative
artificial
intelligence.

Underpriced
Stocks:
Utilities

Utilities
stocks
lagged
the
broader
market
during
the
first
quarter;
the
sector
is
7%
undervalued
heading
into
the
second
quarter.
Nearly
three
fourths
of
the
stocks
we
cover
in
the
sector
are
trading
in
buying
range.
We
think
the
best
positioned
utilities
are
those
in
regions
with
strong
energy
demand
growth
and
widespread
support
of
clean
energy
investments,
say
Morningstar
sector
strategists

Travis
Miller
and

Andrew
Bischof.

How
to
Find
Undervalued
Stocks
to
Buy

Undervalued
stocks
are
those
that
trade
below
what
they’re
worth.
Investors
can
turn
to
several
metrics
to
gauge
a
stock’s
worth.
Some
investors
use
standard
metrics,
such
as
price/earnings
or
price/cash
flow.
Others
may
look
at
a
stock’s
price
relative
to
a
company’s
future
growth
prospects,
or
where
a
stock
is
trading
relative
to
its
52-week
high
price.

At
Morningstar,
we
define
undervalued
stocks
as
those
that
are
trading
below
our
calculated
fair
value
estimate,
adjusted
for
what
we
call
uncertainty—both
of
which
are
wrapped
into
the

Morningstar
Rating
for
stocks.
Stocks
rated
4
and
5
stars
are
undervalued;
those
rated
3
stars
are
fairly
valued;
and
those
rated
1
or
2
stars
are
overvalued.
For
more
about
how
we
calculate
our
fair
value
estimates,
think
about
the

Morningstar
Uncertainty
Rating,
and
more,
read

Morningstar’s
Guide
to
Stock
Investing.

This
story
was
originally
published
on
Morningstar.com
on
April
2. 

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