Now may not be the best time to buy stocks, given that the S&P 500 has jumped 16% since Oct. 27 and is close to a record.
But if you are looking to increase your equity exposure, this might be a good list to peruse: Morningstar’s 10 most undervalued wide-moat stocks.
The research firm assigns wide moats to companies it thinks have competitive advantages that will last at least 20 years. Morningstar measures valuation based on its analysts’ fair-value estimates.
Here’s the top 10, starting with the most undervalued as of Dec. 15.
Retail, Ingredients, Drugs
1. Etsy (ETSY) -), the online arts and crafts store
Morningstar fair value estimate: $145. Thursday price quote: $81.65.
Etsy said this month that it’s cutting 11% of its workforce. “We see the move as measured, following a few quarters of nearly zero headcount growth,” wrote Morningstar analyst Sean Dunlop.
“We expect the company to emerge leaner, as consumer spending begins to recover in the second half of 2024.”
2. International Flavors & Fragrances (IFF) -), the world’s largest specialty ingredients maker
Morningstar fair value estimate: $130. Thursday price quote: $82.10.
“IFF holds an enviable portfolio focused on value-added products used in food and beverages, fragrances, personal care, enzymes, probiotics, and pharmaceuticals,” wrote Morningstar analyst Seth Goldstein.
He’s bullish on the company’s three main segments: flavors, fragrances, and health and biosciences.
3. Pfizer (PFE) -), the pharmaceutical giant
Morningstar fair value estimate: $42. Thursday price quote: $28.80.
Despite the company’s recent difficulties, “Pfizer's foundation remains solid, based on strong cash flows generated from a basket of diverse drugs,” wrote Morningstar analyst Damien Conover. “The company's large size confers significant competitive advantages in developing new drugs.”
4. Veeva Systems (VEEV) -), the world’s leading supplier of cloud-based software for the life sciences industry
Morningstar fair value estimate: $267. Thursday price quote: $191.80.
“Instead of focusing on a general, one-size-fits-all system, Veeva has created platforms that are purely designed to serve one industry,” wrote Morningstar analyst Keonhee Kim.
“And this vertical focus has allowed the company to shape its products for its specific customers to fit their specific needs.”
Morningstar: health care, chemicals, industrial
5. Zimmer Biomet (ZBH) -), a medical device/equipment company
Morningstar fair value estimate: $175. Thursday price quote: $121.85.
6. Corteva (CTVA) -), an agricultural chemicals maker
Morningstar fair value estimate: $67. Thursday price quote: $48.15.
7. Teradyne (TER) -), a testing equipment provider
Morningstar fair value estimate: $147. Thursday price quote: $110.60.
8. RTX Corp. (RTN) -), an aerospace parts maker
Morningstar fair value estimate: $112. Thursday price quote: $84.45
9. Estee Lauder (EL) -), the beauty products company
Morningstar fair value estimate: $200. Thursday price quote: $147.
10. Campbell Soup (CPB) -), the food company
Morningstar fair value estimate: $61. Thursday price quote: $42.90.
The author owns shares of International Flavors & Fragrances and Pfizer.
