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3 Cheap Value Stocks to Buy

These wide-moat companies have reliable cash flows, and their stocks are undervalued today.

3 Cheap Value Stocks to Buy

Hi. I’m Susan Dziubinski for Morningstar. It’s September, and we’re in the late innings of the third quarter of 2023. Growth stocks have outperformed value stocks this year by more than 20 full percentage points—but value stocks have been playing catch up during the past few months. Nevertheless, these days, value stocks still look more attractive than growth stocks according to Morningstar’s metrics.

Today, we’re looking at three cheap value stocks to buy taken from Morningstar’s Best Companies to Own list. Our Best Companies to Own list includes companies with significant competitive advantages—or what we call wide economic moats. These companies also have predictable cash flows and are run by management teams that have a history of making smart capital-allocation decisions. The stocks we’re focusing on today are all around 30% undervalued and land in the value portion of the Morningstar Style Box.

3 Cheap Value Stocks to Buy

  1. Campbell Soup CPB
  2. Wells Fargo WFC
  3. Imperial Brands IMBBY

Our first cheap value stock to buy is Campbell Soup. This leading packaged food manufacturer earns a wide economic moat rating thanks to its cost advantages and brands, which include its namesake brand, Pace, Prego, and Swanson, among others. We think Campbell’s strategy is sound, as it leverages technology, data insights, and artificial intelligence to bring products to the shelf in a timely fashion. We’re forecasting low-single-digit annual sales growth and high-single-digit adjusted average earnings per share growth over the next decade. We think shares are worth $61.

Our next cheap value stock is Wells Fargo. Wells Fargo is one of the top deposit-gatherers in the U.S. behind JPMorgan Chase JPM and Bank of America BAC. The bank is in the midst of a multiyear rebuild, with years of expense-savings projects ahead and additional investment in its existing franchises. The bank also has a sizable presence in the middle-market commercial space and boasts a large advisor network, which supports its wide economic moat rating. Management’s forecast for the coming quarter includes expenses inching up a bit but full-year net interest income rising. We think the stock is worth $61 per share.

Our final cheap value stock this week is Imperial Brands. Morningstar thinks this Big Tobacco name is a “fast follower” rather than a leader in most markets. As a result, the company is more likely to be exposed to cigarettes in the future relative to its peers, who are investing for growth and moving away from the secular decline in cigarettes. We nevertheless expect Imperial Brands to remain a highly profitable and cash-generative business. We think shares are attractive, and that the stock is worth $34 per share.

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Morningstar directors Philip Gorham and Erin Lash and strategist Eric Compton provided the research behind this segment.

Watch “3 Cheap Stocks a Top-Rated Fund Manager Likes” for more from Susan Dziubinski.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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