2 Stocks to Buy on Weakness in June

Hi I’m Susan Dziubinski with Morningstar. The stock market has been wildly volatile this year. Investors have experienced daily swings in the market of 2 or 3 percentage points on a pretty regular basis. Such significant day-to-day volatility can be unnerving but can also provide opportunity for investors to buy stocks on their watchlists on weakness.

Today, we’re looking at the stocks of two companies that own some popular and recognizable brands that we think investors should have on their watchlists in June. These stocks may be about fairly valued today, but they’re worth keeping an eye on, because if volatility persists, these stocks may dip into buying range this month.

The first stock on our list is Colgate-Palmolive CL, which is a leading global consumer products company. Colgate is a giant in the oral-care category, with nearly 40% worldwide market share in toothpaste. But Colgate isn’t only dependent on selling its product on the shelf—it also benefits from the recommendation of dental professionals. Other popular name brands in Colgate’s product portfolio include Ajax, Irish Spring, Softsoap, and of course, Palmolive. Inflation and supply chain bottlenecks have taken a bite out of Colgate’s profits this year. But Morningstar’s analyst thinks the company has significant competitive and cost advantages and it's taking a sound approach to boosting profits over time. We think the stock is a great watchlist candidate with a fair value estimate of $75.

PepsiCo PEP is the second stock on our list of stocks to buy on weakness in June. With a portfolio of popular brands that includes namesake Pepsi, Gatorade, Lipton Tea, Lay's potato chips, Fritos, and Doritos, among others, Pepsi is the top operator globally when it comes to savory snacks and the second-largest name in the carbonated soft drink market. Pepsi's leading brands and cost edge provide the company with significant competitive advantages. Morningstar’s analyst thinks Pepsi has the pricing power and negotiating leverage with suppliers to successfully navigate today’s inflationary environment. It’s our second watchlist idea with a fair value estimate of $164.