2 Undervalued Stocks to Buy With Long-Term Growth Ahead

On the Oct. 19, 2026, episode of The Morning Filter podcast, guest host Sarah Hansen and Morningstar Chief US Market Strategist Dave Sekera discuss why L3Harris LHX and Alliant Energy LNT are long-term stocks to buy. Here is an excerpt from the show.

Why L3Harris Stock Looks Attractive for the Long Term

Sarah Hansen: Let’s move to the defense industry. You’ve brought us L3Harris. Can you walk us through the basics of that stock?

Dave Sekera: L3Harris is currently rated 4 stars, trades at a 27% discount from fair value, and has a 2% dividend yield. We rate the company with a Medium Uncertainty. We assign a narrow economic moat, with that narrow economic moat being based on switching costs and intangible assets.

Hansen: You’ve never recommended this one before. Why is it on your radar right now?

Sekera: I would say it was maybe not quite on my radar in the past because it’s much smaller than what we see from Lockheed LMT or Northrop NOC, which is really where my focus on some of my prior defense picks has been. It’s just a company where I like the portfolio setup the more that I look into it. A lot of what they work on is uncrewed aerial vehicles, sensors, avionics, space-based systems, missiles, solid rocket motors. I think overall, when you think about the change in how defense spending over time may evolve based on how using drones and modern warfare tactics is also evolving, especially with the missiles and missile defense programs, I think this is a company that is going to be well positioned to be able to benefit from that change in defense spending over the longer term.

When I look at our model, our five-year compound annual growth rate for revenue is 5.8%. We’re looking for margin expansion from 11.6% this year to 14.7% by 2030. That’s a little bit faster expansion than what we’re currently modeling in for a company like Lockheed Martin. I like that extra margin expansion on the type of products that they manufacture. Overall, it leads us to a five-year earnings growth of 13%, trades at about 20 times our 2026 earnings estimate, and drops down to 19 times our 2027 earnings estimate. Again, when you put that all together, it’s trading at a pretty good discount, but I think it’s not only that; I think it’s getting a lot more attention from the marketplace as the market is looking at how defense spending evolves.

Why Data Center Growth Could Benefit Alliant Energy Stock

Hansen: Last on your list is a utility. Tell us about Alliant Energy.

Sekera: Alliant is trading at an 11% discount. It’s enough to put it in 4-star-rating territory, being a utilities stock, 3.1% dividend yield, Low Uncertainty, with a narrow economic moat. Like all the other utilities stocks, that narrow economic moat is based on efficient scale.

Hansen: Why do you like Alliant for the long term?

Sekera: I like this one. I think you’re getting a second bite at the apple on this one. It was a recommendation at the beginning of the year. The stock initially went from $65 to $78. That’s enough to put it in 3-star territory. Now, with interest rates having risen over the past couple of months, the stock has backed off, now down to $67. Overall, I still think that from a utilities point of view, it’s well set up to benefit from not only ongoing growth within its regulated utilities, but also from data centers and growth in data centers in the regulated areas over time.

Right now, we’re forecasting earnings growth at the high end of management’s guidance range of 5% to 7%. We’re expecting growth to accelerate beyond 2027. The company has a four-year capital investment plan of $13.4 billion; that’s up 24% from its prior plan. That indicates just how much more growth expansion they have. There are three different data centers under construction, and a fourth with a signed agreement within the areas where they operate. That’s a total of 3 gigawatts of extra demand. That should drive 12% annual sales growth from 2025 to 2030. Even from there, I mean there’s an additional 2-4 gigawatts that we think could materialize beyond 2028. Overall, that really operates in some very constructive regulatory environments, which we think benefits investors over the longer term as well.

Subscribe to The Morning Filter on Apple Podcasts, or wherever you get your podcasts, and keep up with the latest research from hosts Susan Dziubinski and David Sekera on Morningstar.com.