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33 Undervalued Stocks

Here’s the new list of Morningstar’s top underpriced analyst picks to buy for Q2 2024.

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The US stock market finished the first quarter of 2024 up more than 10% as measured by the Morningstar US Market Index.

Heading into the second quarter, stocks look fairly valued, according to our metrics: Looking at a composite of the stocks Morningstar covers, the US stock market is trading at a price/fair value of 1.03 at the end of the first quarter. In comparison, stocks were trading at a 12% discount to fair value one year ago.

With the market trading at a slight premium to our fair value estimate, what might that mean for the remainder of 2024? “In our view, it is unlikely that what has worked for the last year and a half will be what continues to work,” writes Morningstar Chief US Market Strategist David Sekera in his second-quarter 2024 stock market outlook. “We think now is a good time for investors to look for contrarian investment opportunities, especially in those areas that have underperformed, are unloved—and most importantly—undervalued.”

Here’s how stock market valuations look through a few different lenses:

  • By investment style, small-value stocks are the most undervalued stocks right now, trading 26% below our fair value estimate. Meanwhile, large- and mid-cap growth stocks are 8% overvalued.
  • By sector, industrials, technology, financial services, and consumer defensive stocks look most overvalued. The most undervalued sectors heading into the second quarter are real estate, utilities, and communication services.
  • By Morningstar Economic Moat Rating, which is a sign of a company’s competitive advantages, wide-moat stocks are overvalued by 4%, while narrow- and no-moat stocks are about fairly valued.

33 Undervalued Stocks to Buy for Q2 2024

Here’s the list of Morningstar’s top underpriced stock picks for the second quarter of 2024.

  1. Adobe ADBE
  2. Albemarle ALB
  3. APA APA
  4. Cognizant Technology Solutions CTSH
  5. Comcast CMCSA
  6. Crown Castle CCI
  7. Dow DOW
  8. Duke Energy DUK
  9. Entergy ETR
  10. Federal Realty Investment Trust FRT
  11. FMC FMC
  12. Hanesbrands HBI
  13. Illumina ILMN
  14. Kraft Heinz KHC
  15. MarketAxess Holdings MKTX
  16. Moderna Therapeutics MRNA
  17. NiSource NI
  18. PayPal Holdings PYPL
  19. Realty Income O
  20. Schlumberger SLB
  21. Sealed Air SEE
  22. Stericycle SRCL
  23. STMicroelectronics STM
  24. TC Energy TRP
  25. Tyson Foods TSN
  26. Under Armour UA
  27. U.S. Bancorp USB
  28. VF VFC
  29. Ventas VTR
  30. Warner Brothers Discovery WBD
  31. Wesco International WCC
  32. WK Kellogg KLG
  33. Zimmer Biomet ZBH

Here’s a brief summary of how valuations stack up across sectors, along with some key Morningstar metrics about each undervalued stock to buy. Individual stock data is as of March 31, 2024.

Undervalued Basic-Materials Stocks

Basic-materials stocks have underperformed the broader so far in 2024 and are fairly valued heading into the second quarter. Morningstar strategist Seth Goldstein reports that 60% of the stocks that Morningstar covers in the sector are trading with Morningstar Ratings of 4 or 5 stars. While building-materials stocks look overvalued, more than half of the stocks in the agriculture, chemicals, and metals and mining industries are underpriced.

Company/Ticker
Price/Fair Value
Fair Value Uncertainty
Economic Moat Rating
Albemarle ALB0.43HighNarrow
FMC FMC0.57HighNarrow
Dow DOW0.84MediumNarrow

Underpriced Communications-Services Stocks

The communication-services sector performed in line with the broad market during the first quarter. The sector enters the second quarter of 2024 trading 6% below our fair value estimate. While heavyweight Meta Platforms META has continued to soar this year, there is plenty of opportunity in the sector, observes Morningstar sector director Mike Hodel. In particular, more than three fourths of the stocks we cover in the telecom subsector are trading in 4- and 5-star range.

Company/Ticker
Price/Fair Value
Fair Value Uncertainty
Economic Moat Rating
Comcast CMCSA0.71MediumWide
Crown Castle CCI0.80MediumNarrow
Warner Brothers Discovery WBD0.42Very HighNone

Cheap Consumer Cyclical Stocks Today

Consumer cyclical stocks underperformed the broader market during the first quarter. The sector enters the second quarter of 2024 trading 2% below our fair value estimate. Less than half of the stocks that we cover in the sector are trading in 4- and 5-star range, says Morningstar sector director Erin Lash. The auto, apparel, and travel and leisure industries hold the most opportunities from a valuation perspective.

Company/Ticker
Price/Fair Value
Fair Value Uncertainty
Economic Moat Rating
Hanesbrands HBI0.31Very HighNarrow
Under Armour UA0.44HighNone
VF VFC0.27Very HighNarrow

Undervalued Stocks in the Consumer Defensive Sector

Consumer defensive stocks lagged the market during the first quarter. The sector looks 6% overvalued heading into the second quarter of 2024. Yet there are opportunities to be found, says Morningstar’s Lash: In particular, nearly half of the stocks we cover in the consumer packaged goods industry are trading in 4- and 5-star range. All of the tobacco stocks we cover look undervalued, too.

Company/Ticker
Price/Fair Value
Fair Value Uncertainty
Economic Moat Rating
Kraft Heinz KHC0.67MediumNone
WK Kellogg KLG0.70MediumNone
Tyson Foods TSN0.70MediumNone

Underpriced Energy Stocks Right Now

Energy stocks outperformed the broader market during the first quarter as oil prices rose. We expect the US production growth curve to flatten further in 2024, says Morningstar sector strategist Stephen Ellis. The energy sector looks about 3% undervalued today. About half of the names we cover in the drilling and integrated oil and gas industries look undervalued.

Company/Ticker
Price/Fair Value
Fair Value Uncertainty
Economic Moat Rating
APA APA0.53Very HighNone
Schlumberger SLB0.91HighNarrow
TC Energy TRP0.86MediumNarrow
5 Undervalued Stocks to Buy During Q2 2024

Undervalued Stocks: Financial Services

The financial-services sectorhas outperformed the broad market so far in 2024; the sector is 6% overvalued at the start of the second quarter. However, more than half of the bank stocks we cover are trading at 4- and 5-star levels, notes Morningstar sector director Michael Wong. Over the medium term, we expect balance sheet changes to offset some of the pressure from lower interest rates, he concludes.

Company/Ticker
Price/Fair Value
Fair Value Uncertainty
Economic Moat Rating
MarketAxess Holdings MKTX0.73HighWide
PayPal Holdings PYPL0.63HighNarrow
U.S. Bancorp USB0.84MediumWide

Top Cheap Healthcare Stocks

Healthcare stocks underperformed during the first quarter of 2024, yet as a group are trading 1% above our fair value estimate. Opportunities do exist, particularly in the biotech industry, as well as among providers and services, healthcare plans, and drug manufacturers, reports Morningstar sector director Damien Conover. We don’t think the market fully appreciates the innovation in the biotech and drugmaker group, in particular.

Company/Ticker
Price/Fair Value
Fair Value Uncertainty
Economic Moat Rating
Illumina ILMN0.59HighNarrow
Moderna Therapeutics MRNA0.49Very HighNone
Zimmer Biomet ZBH0.73MediumWide

Inexpensive Industrials Stocks

Industrials stocks slightly outperformed the broader market during the first quarter of 2024 and look 13% overvalued today. Morningstar sector director Brian Bernard reports that isolated investment opportunities remain in the aerospace and defense, farm and heavy construction machinery, and waste management industries.

Company/Ticker
Price/Fair Value
Fair Value Uncertainty
Economic Moat Rating
Sealed Air SEE0.66HighNarrow
Stericycle SRCL0.88MediumNarrow
Wesco International WCC0.88MediumNarrow

Overlooked Real Estate Stocks to Buy

Real estate stocks finished the first quarter of 2024 in the red and currently trade at an 11% discount to our fair value estimate. More than half of the names in the sector are trading in either the 4- or 5-star range, says Morningstar senior equity analyst Kevin Brown. We expect rental rate, revenue, and net operating income growth to remain positive in 2024.

Company/Ticker
Price/Fair Value
Fair Value Uncertainty
Economic Moat Rating
Federal Realty Investment Trust FRT0.70MediumNone
Realty Income O0.69LowNone
Ventas VTR0.61MediumNone

Undervalued Technology Stocks for 2024

Technology stocks continued to win big in the first quarter, outperforming the broad market. The tech sector looks 8% overvalued heading into the second quarter of 2024. Morningstar senior analyst Dan Romanoff says there are a few but not many buying opportunities in semiconductors, hardware, and software. We think the most important catalyst for the sector in 2024 revolves around generative artificial intelligence.

Company/Ticker
Price/Fair Value
Fair Value Uncertainty
Economic Moat Rating
Cognizant Technology Solutions CTSH0.77MediumNarrow
Adobe ADBE0.83HighWide
STMicroelectronics STM0.65HighNarrow

Underpriced Stocks: Utilities

Utilities stocks lagged the broader market during the first quarter; the sector is 7% undervalued heading into the second quarter. Nearly three fourths of the stocks we cover in the sector are trading in buying range. We think the best positioned utilities are those in regions with strong energy demand growth and widespread support of clean energy investments, say Morningstar sector strategists Travis Miller and Andrew Bischof.

Company/Ticker
Price/Fair Value
Fair Value Uncertainty
Economic Moat Rating
Entergy ETR0.84LowNarrow
NiSource NI0.82LowNarrow
Duke Energy DUK0.85LowNarrow

How to Find Undervalued Stocks to Buy

Undervalued stocks are those that trade below what they’re worth. Investors can turn to several metrics to gauge a stock’s worth. Some investors use standard metrics, such as price/earnings or price/cash flow. Others may look at a stock’s price relative to a company’s future growth prospects, or where a stock is trading relative to its 52-week high price.

At Morningstar, we define undervalued stocks as those that are trading below our calculated fair value estimate, adjusted for what we call uncertainty—both of which are wrapped into the Morningstar Rating for stocks. Stocks rated 4 and 5 stars are undervalued; those rated 3 stars are fairly valued; and those rated 1 or 2 stars are overvalued. For more about how we calculate our fair value estimates, think about the Morningstar Uncertainty Rating, and more, read Morningstar’s Guide to Stock Investing.

Morningstar Investor members have access to lists of 5-star stocks and 4-star stocks and can use the Morningstar Investor screener to find undervalued stocks based on their own criteria.

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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