With the S&P 500 dropping 20% year to date, many stocks are now arguably undervalued.
Morningstar has put together a list of the 10 most undervalued stocks that have earned a wide moat from the firm.
The firm determines whether a stock is undervalued according to the fair value estimates of its analysts. A wide moat means the companies have “significant advantages that allow them to successfully fend off competitors for decades,” according to Morningstar.
As for the list, it includes:
1. Compass Minerals (CMP) , a salt and fertilizer producer: 59% undervalued.
2. Meta Platforms (META) , the social media titan: 58% undervalued.
3. MercadoLibre (MELI) , a Latin American online marketplace: 58% undervalued.
4. Teradyne (TER) , a test equipment maker: 48% undervalued.
5. Equifax (EFX) , the credit reporting agency: 45% undervalued.
6. Boeing (BA) , the jet maker: 44% undervalued.
7. Salesforce (CRM) , the business software company: 44% undervalued.
8. Amazon.com (AMZN) the retailer/technology giant: 44% undervalued.
9. Intel (INTC) , the semiconductor company: 42% undervalued.
10. Polaris (PII) , an outdoor vehicle maker: 41% undervalued.
Morningstar’s Take on Compass Minerals
The company “holds an enviable portfolio of cost-advantaged assets,” Morningstar analyst Seth Goldstein wrote in a commentary.
“Its Goderich rock salt mine in Ontario benefits from unique geology, and with access to a deep-water port, it can deliver de-icing salt to customers at a lower cost than competitors,” he said.
“Additionally, the company controls one of only three naturally occurring brine sources that produces the specialty fertilizer sulfate of potash.”
Morningstar’s Take on Meta Platforms
The company is “the largest social network in the world, with over 3.6 billion monthly active users across its apps,” Morningstar analyst Ali Mogharabi wrote in a commentary.
“The growth in users and user engagement, along with the valuable data that they generate, makes Meta’s platforms attractive to advertisers.”
Further, “the combination of these valuable assets and our expectation that advertisers will continue shift their spending online bodes well for the firm’s top-line growth and cash flow.”
Morningstar’s Take on MercadoLibre
The company “continues to position itself as a one-stop e-commerce solution for Latin American buyers and sellers,” Morningstar analyst Sean Dunlop wrote in a commentary.
“The firm has quietly developed a comprehensive ecosystem of mutually reinforcing services, with its core marketplace supported by:
· “A payments and lending arm (Mercado Pago),
· A best-in-breed shipping solution (Mercado Envios),
· A robust advertising platform (Mercado Clics), and
· A volume-generating classifieds business.”
The author of this story owns shares of Meta Platforms, Salesforce, Amazon and Intel.