2 Top Stocks for Value Investors to Buy Now
The undervalued stocks of these large-cap companies with economic moats look attractive.
Susan Dziubinski: I’m Susan Dziubinski with Morningstar. The US stock market is starting to look overvalued. While growth stocks still look more expensive than value stocks, plenty of value stocks look overpriced, too.
But fear not, value investors. Today, we’re looking at a couple of stocks that land in the large-value portion of the Morningstar Style Box. These companies also have carved out economic moats, which means Morningstar expects them to remain competitive for a decade or more. And they both appear on Morningstar’s list of undervalued stocks our analysts like for the fourth quarter. We think these stocks are attractive for value investors today.
2 Top Stocks for Value Investors to Buy Now
Our first attractive large-value stock this week is PayPal PYPL. Morningstar thinks PayPal is a clear leader in electronic payments, and we assign the company a narrow economic moat rating. The shift toward electronic payments—which the pandemic temporarily accelerated—has boosted growth. But PayPal is now facing near-term headwinds as the positives from the pandemic reverse and new competition heats up. Management is therefore refocusing on top-line growth, cost control, and product innovation. We think it’s the right move, but the plan may take some time to bear fruit. PayPal’s stock looks cheap; we think it’s worth $104 per share.
Our second cheap large-cap value stock this week is Nike NKE. As the largest athletic footwear and apparel brand in the world, we think Nike has carved out a wide economic moat. But Nike has been plagued by problems lately, including a lack of product innovation, soft demand for sportswear, and a CEO change. And as a result, the stock has lost about a third of its value this year. But Morningstar thinks the company’s competitive advantages will help it overcome its current challenges. Specifically, we’re optimistic about Nike’s Triple Double strategy to double innovation, speed, and direct connections to consumers. And we think there are opportunities for growth in emerging markets. The stock looks appealing as it trades well below Morningstar’s $117 fair value estimate.
For more undervalued stock ideas, be sure to subscribe to Morningstar’s channel and visit Morningstar.com.
Morningstar senior analysts Brett Horn and David Swartz provided the research behind this segment.
Watch 3 Top Stocks for Growth Investors to Buy Now 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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