Susan Dziubinski: Hi. I’m Susan Dziubinski with Morningstar. It’s almost time for the big game: The Kansas City Chiefs and the San Francisco 49ers kick off on Sunday. And in what has become an annual tradition, companies will spend millions of dollars to advertise their products during the broadcast.
At Morningstar, we think it’s a gamble to buy the stock of a company simply because it’s advertising during the big game and you’re hoping for a postgame pop in the stock price. In fact, Morningstar thinks the stocks of most of the companies advertising during the big game look fairly valued or overvalued ahead of game day. We think investors with an urge to buy the overpriced stocks of game-day advertisers should shake it off.
We suggest following Morningstar’s playbook instead: Buy undervalued stocks for the long term. We think that’s the winning strategy for any market. With that in mind, here are three companies planning to advertise during the big game that we like for the long term and whose stocks look undervalued to Morningstar today.
3 Undervalued Stocks to Buy Before the Big Game
The first stock on our list of undervalued stocks to buy for the long term before the big game is Anheuser-Busch InBev. AB InBev is the largest brewer in the world and one of the world’s largest consumer product companies. We think the company has carved out a wide economic moat, which means that we expect it to be able to effectively fight off competitors for two decades or more. Inflation and negative publicity about the marketing of Bud Light in the U.S. hurt results and the stock’s performance in 2023. We think the stock is significantly undervalued today and worth $90.
The next cheap stock to buy and hold ahead of the big game is Volkswagen. Volkswagen is one of the world’s largest automakers, whose brands include not only its namesake but also Audi, Bentley, Lamborghini, and Porsche, among others. The company has one of the most aggressive plans among automakers to switch to battery electric vehicles from internal combustion powertrains. The company’s common architecture manufacturing strategy has allowed it to increase its economies of scale. As with other automakers, though, we don’t think Volkswagen has built out an economic moat, even though its portfolio includes several premium and storied brands. We think shares are worth $37.
The final cheap stock we like ahead of the big game is Nestle. Nestle is one of the largest food and beverage makers in the world. Nestle owns the Drumstick Ice Cream brand, which it plans to advertise for on game day. But its sizable product portfolio also includes brands like Pellegrino, Pure Life, and Purina, among others. We think Nestle has carved out a wide economic moat, thanks to its cost advantages and its entrenched position with retailers. We think management’s investments in high-growth categories such as coffee, pet care, water, and nutrition, plus positive secular drivers in emerging markets, bode well for future growth. We think shares are worth $130 apiece.
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Morningstar strategist Philip Gorham and senior analysts Richard Hilgert and Ioannis Pontikis provided the research behind this report.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.