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These Firecracker Stocks Could Still Be Climbing

Even after achieving solid returns in the second quarter, these stocks still look cheap.

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There weren't a lot of fireworks in the stock market in the second quarter. Sure there were periods of softness here or stretches of strength there, but after all was said and done the market basically ended up where it started.

But of course not every stock or every sector posted lackluster returns in the quarter. Health-care stocks had a great run during the quarter, and consumer stocks provided some nice returns, as well. We at Morningstar generally have a pretty simple stock-investing philosophy: Buy great companies at cheap pieces and hold on to them for a long time. So generally speaking, we see pauses in the stock market as a good opportunity to make some long-term investments.

So does that mean that investors should forgo investing in these sectors and exclusively look at laggards such as energy? Absolutely not. Sometimes stocks that have had a good run are just on the start of a hot streak. If, even after the runup, the stock still looks cheap on an absolute basis, it might still be a good entry point. The stock might not be as cheap as it once was, but it might still provide respectable returns over time.

Jeremy Glaser does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.