2 More of the Best Small-Cap Stocks to Buy While They’re Still Undervalued
The stocks of these small companies with economic moats look attractive today.
Susan Dziubinski: Hi. I’m Susan Dziubinski, co-host of The Morning Filter podcast. Small-cap stocks have been outperforming large-cap stocks since November. And on a recent episode of the podcast, Morningstar’s chief US market strategist Dave Sekera highlighted a few of his favorite undervalued small-cap stocks today. They were Mosaic MOS, Terex TEX, and Sensata Technologies ST.
Today, we’ll cover two more small-cap stocks that look undervalued today. We think they’re among the best small-company stocks for investors to buy.
2 More of the Best Small-Cap Stocks to Buy While They’re Still Undervalued
Our first small-cap stock to buy is Lamb Weston LW. Lamb Weston is North America’s largest frozen potato producer, selling french fries to restaurants. Despite its niche focus, we think frozen potatoes are positioned for solid long-term demand growth. In fact, global frozen potato demand grew at a healthy 5% per year before the pandemic, and we see tailwinds that should support a return to high growth. We assign Lamb Weston a narrow economic moat rating, based on cost advantages and intangible assets, which are the result of its entrenched customer relationships. We think Lamb Weston stock is worth $80 per share.
Read Morningstar’s full report on Lamb Weston.
Our second attractive small company to invest in is Brown-Forman BF.B. Brown-Forman manufactures premium distilled spirits that include well-known Tennessee whiskey brand Jack Daniel’s and bourbon brands Woodford Reserve and Old Forester. Thanks to its powerful brands, we think the company has carved out a wide economic moat. Demand weakness in North America and Europe has weighed on recent results. While the near-term outlook is still weak, we expect brand strength, innovation, and emerging market growth to drive annual sales to 3% expansion over the next decade. We think shares are worth $37 each.
Read Morningstar’s full report on Brown-Forman.
For more stock ideas, be sure to tune into The Morning Filter each week, wherever you get your podcasts. And visit Morningstar.com, too.
Morningstar senior analyst Kris Inton and analyst Dan Su provided the research behind this segment.
Watch Add These Core Stocks to Your Buy List in 2026 for more than 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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