3 Stocks to Buy With Your Tax Refund in 2025
These undervalued stocks from dominant companies are great long-term investments.
Susan Dziubinski: I’m Susan Dziubinski with Morningstar. We’re in the thick of tax season. And if this year is anything like last year, the average Federal tax refund will be a little above $3,000. Many people use their refunds on home improvement projects or to pay down debt.
But some people like to invest their refunds. So, today, we’re talking about three stocks from very high-quality companies that look undervalued, according to Morningstar.
Before we dig in, let’s acknowledge the elephant in the room: The market has been exceptionally volatile this year, and Morningstar expects the economy to slow, which could mean more volatility ahead. But we nevertheless think these stocks are great investments for the long term, given how dominant these companies are in their industries.
3 Stocks to Buy With Your Tax Refund in 2025
All right, the first stock to buy with your tax refund in 2025 is Alphabet. We think Alphabet has carved out a wide economic moat, which means we expect the company to remain competitive for 20 years or more. Alphabet’s wide moat stems from four separate moat sources that permeate a variety of businesses it owns. Those moat sources are: intangible assets, network effect, cost advantages, and customer switching costs. Antitrust concerns have weighed on the stock, but we’re not forecasting a material deterioration in Google’s search business as a result of either governmental or judicial intervention. We think Alphabet stock is worth $237 per share.
Read Morningstar’s full report on Alphabet.
The second stock to buy with your refund this year is Amazon AMZN. Like Alphabet, Amazon is also a wide-moat company with the same four sources of moat: intangible assets, network effect, cost advantages, and customer switching costs. We expect continued innovation to drive market share gains in Amazon’s retail business. And we think technology advancements in AWS and a bigger push to servicing enterprise customers will help to drive free cash flow growth for years to come. We think Amazon stock is worth $240 per share.
Read Morningstar’s full report on Amazon.
And the final stock to buy with your 2025 tax refund is Microsoft. Microsoft’s wide moat stems from three moat sources: cost advantage, network effect, and switching costs. Microsoft is one of two public cloud providers that can deliver a wide variety of platform-as-a-service and infrastructure-as-a-service solutions at scale. We believe that Azure is the centerpiece of the new Microsoft. Microsoft is also shifting its traditional on-premises products to become cloud-based software as a service solution. We think Microsoft stock is worth $490 per share.
Read Morningstar’s full report on Microsoft.
For more stock ideas be sure to visit Morningstar.com
Morningstar senior analyst Dan Romanoff and analyst Malik Ahmed Khan provided the research behind this segment.
Watch Warren Buffett Sold These 2 ETFs. Should You? 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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