As you’re undoubtedly well aware, the stock market has tumbled this year, with the S&P 500 dropping 19% year to date.
That has led some experts to argue that stocks are undervalued. Analysts at Morningstar, the investment research firm, are among them.
Looking at all the North American stocks covered by Morningstar analysts, the median stock traded at a 17% discount compared to the analysts’ fair value estimates as of June 30.
“At current valuations, we think the market is overly pessimistic regarding the economic outlook,” Morningstar chief U.S. market strategist Dave Sekera wrote in his latest stock market outlook.
Morningstar named its top 33 picks among undervalued stocks. Here are 10 of them in alphabetical order. The stock-price-to-fair value estimates are as of July 6. And those fair-value estimates are Morningstar’s own.
· BlackRock (BLK), the world’s biggest money manager. Stock-price-to-fair-value estimate: 0.72.
· Citigroup (C), the bank. Price-to-fair-value estimate: 0.61.
· Comcast (CMCSA), the media/entertainment company. Price-to-fair-value estimate: 0.66.
· Disney (DIS), the media/entertainment company. Price-to-fair-value estimate: 0.57.
· Exxon Mobil (XOM), the oil producer. Price-to-fair-value estimate: 0.93.
· Goldman Sachs (GS), the bank. Price-to-fair-value estimate: 0.70.
· Johnson Controls (JCI), which produces heating and cooling equipment. Price-to-fair-value estimate: 0.72.
· Meta Platforms (META), the social media company. Price-to-fair-value estimate: 0.44.
· Salesforce (CRM), the business software company. Price-to-fair-value estimate: 0.59.
· Simon Property Group (SPG), the mall real estate investment trust. Price-to-fair-value estimate: 0.63.
Morningstar’s Take on BlackRock
“We still consider BlackRock to be our top-pick amongst the U.S.-based traditional asset managers we cover,” Morningstar analyst Greggory Warren.
“The company's shares are currently trading at a nearly 30% discount to our fair value estimate — compared with 20% on average for the nine firms in our U.S.-based as set manager coverage.”
But Blackstone usually trades at a premium to the others. “So the best time to buy tends to be during market downturns like we have seen so far this year,” Warren said.
Morningstar’s Take on Johnson Controls
“As a pure-play building technologies and solutions business, Johnson Controls stands to benefit from secular trends in global urbanization and increased demand for energy-efficient and smart building products and solutions,” Morningstar analyst Brian Bernard wrote in a commentary.
“We also expect the covid pandemic will increase the market opportunity for healthy building solutions, such as air filtration and touchless access controls. These secular tailwinds should allow Johnson Controls to grow faster than the economies it serves.”
Morningstar’s Take on Simon Property Group
“Simon Property Group, the largest mall real estate investment trust, manages one of the top retail portfolios in the country,” Morningstar analyst Kevin Brown wrote in a commentary.
“It owns and operates Class A traditional regional malls and premium outlets in markets with dense populations and high incomes.”
Further, “the high-quality properties will continue to provide consumers with unique shopping experiences…, and as a result, we think Simon's portfolio will be sought after by retailers that are increasingly pursuing an omnichannel strategy,” Brown said.
