2 Undervalued Stocks to Buy Before They Rebound
These wide-moat stocks look attractive after their recent pullbacks.
Susan Dziubinski: Hi, I’m Susan Dziubinski, co-host of The Morning Filter podcast. On a recent episode, Morningstar Chief US Market Strategist Dave Sekera talked about several quality stocks that looked attractive after they recently pulled back. Dave’s stock picks in that episode were Procter & Gamble PG, Hershey HSY, Marvell Technology MRVL, and ASML ASML.
In today’s bonus stock-pick segment, we’re focusing on two more stocks that recently pulled back that look attractive today. Both of these stocks are from wide-moat companies, and both are trading well below Morningstar’s fair value estimates.
2 Undervalued Stocks to Buy Before They Rebound
Our first undervalued stock to buy before it rebounds is Lockheed Martin. Morningstar assigns the defense giant a wide Economic Moat Rating based on two moat sources. The first moat source is intangible assets, as Lockheed’s extreme product complexity limits new competition and locks out alternative suppliers. The second moat source is switching costs, as there would be significant time and risk for a client to potentially switch products. We expect Lockheed’s consolidated revenue to grow at low-single-digit rates in 2026 and beyond as increased defense spending on newer programs flows through to the top line, muted by maturing programs like the F-35. We think Lockheed Martin’s stock is worth $650 per share.
Read Morningstar’s full report on Lockheed Martin.
Our second undervalued stock to buy before it rebounds is NXP Semiconductors. As one of the largest suppliers of semiconductors for the automotive market, NXP earns a wide Economic Moat Rating from two moat sources. The company’s proprietary analog and mixed-signal chip design and manufacturing expertise are intangible assets. The company also benefits from switching costs that make it difficult to swap out analog and mixed-signal chips for competing offerings once they’re designed into a particular electronic device. Like many of its chipmaking peers, NXP is well positioned to benefit from safer, greener, smarter cars in the years ahead. We model 15% revenue growth in 2026 and 11.5% growth in 2027, and then 8% midcycle growth thereafter. We assign NXP a $310 fair value estimate.
Read Morningstar’s full report on NXP Semiconductors.
For more stock ideas, be sure to tune in to The Morning Filter each week wherever you get your podcasts and visit Morningstar.com, too.
Morningstar senior analyst Brian Colello and analyst Nic Owens provided the research behind this segment.
Watch 3 Undervalued International Stocks for US Investors 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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