+1123, 1:49.00 33 Undervalued Stocks | Momingstar FOR INVESTORS FOR BUSINESS Asour us ‘oun Picks 33 Undervalued Stocks Here's the new list of Morningstar's top analyst picks for 01 2023. Ww » oO. OO. ‘Susan Dziubinski Jan 6, 2023 Mentioned: TechnipFMC PLC (FTI), Lithium Americas Corp (LAC) , Fortune Brands Innovations Inc (FBIN} , ServiceNow Inc (NOW) , Park Hotels & Resorts Inc {PK} , Equitrans Midstream Cotp (ETRN) , Moderna Inc (MRNA) , Berkshire Hathaway Inc (BRK.A}, VF Corp (VEC), Carnival Corp (CC) Stocks finished 2022 down more than 19%, as measured by the Morningstar US Market Index. Stubbornly high inflation, rising interest rates, and talk of a possible economic recession rattled markets for much of the year. Heading into 2023, stocks look downright cheap according to our metrics. The median stock in Morningstar's North American coverage finished the year trading at a 16% discount to our fair value estimate. nips:iwww-momningstarcomiarticles!1131377/33-undervalued-stocks-fr-97-2023 16“a8, 149004 {33 Undervalued Stocks | Momingstar “As much as we thought stocks were overvalued coming into 2022, we now see the markets as trading at a deep discount to our fair value estimate,” writes Morningstar chief U.S. market strategist Dave Sekera in his latest stock market outlook. Stocks look undervalued almost across the board: Looking for more income, less volatility, BUDE U LUE Looking for more income? Morningstar DividendInvestor can help. * By investment style, small-value stocks are the most undervalued, trading 40% below our fair value estimate, with large-cap core stocks only about 11% undervalued * By sector, communication services and consumer cyclical are the two most undervalued, trading 43% and 30% below our fair values, respectively. Defensive stocks in the utilities, healthcare, and consumer defensive sectors, meanwhile, are about fairly valued. Energy stocks remain overvalued by 12%, according to our estimates. * By Morningstar Economic Moat Rating, which is a sign of a company's competitive advantages, wide-moat stocks and no-moat stocks are undervalued by about 20%, while narrow moat stacks are just 10% undervalued 33 Undervalued Stocks for Q1 2023 Here’s the list of Morningstar's top stock picks for the first quarter of 2023. nips:iwww-momningstarcomiarticles!1131377/33-undervalued-stocks-fr-97-2023 216“v3, 14904 {33 Undervalued Stocks | Momingstar . Alliant Energy LNT . Alphabet GOOGL . ASML Holding ASML . Berkshire Hathaway BRK.A . Blackstone BX |. Boston Beer SAM . Carnival CCL . Celanese CE 9. Citigroup 10. Comcast CMCSA 11, Ecolab ECL 12. Edison International EIX 13. Equitrans Midstream ETRN 14. Exxon Mobil XOM 15. FedEx FDX 16. Fortune Brands Innovations FBIN 17. Hain Celestial Group HAIN 18. Hanesbrands HBI 19. Illumina ILMN 20. Lithium Americas LAC 21. Moderna MRNA 22. NiSource NI 23. Park Hotels & Resorts PK 4. Salesforce CRM 25. ServiceNow NOW 26. Simon Property Group SPG '7. Southwest Airlines LUV 28. TechnipFMC FTI '9. Tyson Foods TSN 30. Ventas VIR 31. VF Corp VFC 32. Walt Disney DIS 33. Zimmer Biomet Holdings ZBH PNYONFwNne y eNrs XR nm tps www momingstarconvatles/1191377/33-undervalued-stocks-for-q1-2023 a61123, 149.0 {33 Undervalued Stocks | Momingstar Here’s a brief summary of how valuations stack up across sectors, along with some key Morningstar metrics about each stock pick. Data is as of Dec. 30, 2022. Undervalued Basic-Materials Stocks Basic-materials stocks outperformed the broader market in 2022. Nevertheless, Morningstar sector strategist Seth Goldstein reports that more than half the stocks that Morningstar covers in the sector are trading with Morningstar Ratings of 4 and 5 stars. While building-materials stocks remain fairly overvalued, many stocks in the agriculture and forest products industries are undervalued, as are two thirds or more of the chemicals and metals and mining stocks under our coverage. Celanese * Morningstar Economic Moat Rating: Narrow + Price/Fair Value: 0.64 * Morningstar Uncertainty Rating: Medium * Morningstar Rating: 5 Stars Ecolab * Morningstar Economic Moat Rating: Wide * Price/Fair Value: 0.69 * Morningstar Uncertainty Rating: Medium * Morningstar Rating: 4 Stars Lithium Americas * Morningstar Economic Moat Rating: None + Price/Fair Value: 0.29 * Morningstar Uncertainty Rating: Very High * Morningstar Rating: 5 Stars High-Quality Communication-Services Stock Picks The communication-services sector lagged the broader market in 2022, finishing the year trading 43% below our fair value estimate. Advertising uncertainty is weighing heavily on the sector, observes Morningstar sector tps www momingstarconvatles/1191377/33-undervalued-stocks-for-q1-2023 “6“a8, 149004 {33 Undervalued Stocks | Momingstar director Mike Hodel. Opportunities abound across all subsectors: media, interactive media, and telecom. In fact, not a single communications-services stock we cover is overvalued by our metrics. Alphabet NEWSLETTERS Smart Investor Markets editor, Tom Lauricella, delivers a weekly rundown of Morningstar's latest on the big trends driving the markets and new investment opportunities. (oasubohon) (Gubseribe Now ) * Morningstar Economic Moat Rating: Wide * Price/Fair Value: 0.55 * Morningstar Uncertainty Rating: High * Morningstar Rating: 5 Stars Comcast * Morningstar Economic Moat Rating: Wide * Price/Fair Value: 0.58 * Morningstar Uncertainty Rating: Medium * Morningstar Rating: 5 Stars Walt Disney * Morningstar Economic Moat Rating: Wide * Price/Fair Value: 0.56 * Morningstar Uncertainty Rating: Medium * Morningstar Rating: 5 Stars Best Consumer Cyclical Stocks Today Consumer cyclical stocks underperformed the broader market last year. Coming into 2023, the sector trades at a 21% discount to our fair value estimates, with 61% of the stocks that we cover trading in 4- and 5-star range, nips:iwww-momningstarcomiarticles!1131377/33-undervalued-stocks-fr-97-2023 5161123, 149.0 {33 Undervalued Stocks | Momingstar says Morningstar sector director Erin Lash. Economic uncertainty is weighing on the sector, she adds. Apparel and travel and leisure are the most undervalued industries in the sector. Carnival * Morningstar Economic Moat Rating: None * Price/Fair Value: 0.37 * Morningstar Uncertainty Rating: High * Morningstar Rating: 5 Stars Hanesbrands * Morningstar Economic Moat Rating: Narrow + Price/Fair Value: 0.29 * Morningstar Uncertainty Rating: High * Morningstar Rating: 5 Stars VF Corp * Morningstar Economic Moat Rating: Narrow * Price/Fair Value: 0.45 * Morningstar Uncertainty Rating: Medium * Morningstar Rating: 5 Stars Undervalued Stocks in the Consumer Defensive Sector Consumer defensive stocks thrived {relatively speaking) in 2022; the median stock in the sector trades at a 2% premium to our fair value estimate coming into 2023. Yet there are opportunities to be found, says Lash. In particular, the alcoholic beverage industry trades at a 15% discount, while 40% of the consumer packaged goods stocks that we cover trade in 4- and 5-star territory. Boston Beer * Morningstar Economic Moat Rating: Narrow * Price/Fair Value: 0.49 + Morningstar Uncertainty Rating: High * Morningstar Rating: 5 Stars tps www momingstarconvatles/1191377/33-undervalued-stocks-for-q1-2023 er1123, 149.0 33 Undervalued Stocks | Momingstar Hain Celestial Group * Morningstar Economic Moat Rating: None * Price/Fair Value: 0.45 * Morningstar Uncertainty Rating: Medium * Morningstar Rating: 5 Stars Tyson Foods * Morningstar Economic Moat Rating: None * Price/Fair Value: 0.59 * Morningstar Uncertainty Rating: Medium * Morningstar Rating: 5 Stars Top Energy Stocks Energy stocks ran circles around all other sectors in 2022, finishing the year up more than 50%. Given their outperformance during the past 12 months, energy stocks are 12% overvalued as a group, says Morningstar sector director Dave Meats. Most industries in the energy sector look overvalued, though there are some opportunities in the services and midstream segments, Equitrans Midstream * Morningstar Economic Moat Rating: Narrow + Price/Fair Value: 0.48 * Morningstar Uncertainty Rating: High * Morningstar Rating: 5 Stars Exxon Mobil * Morningstar Economic Moat Rating: Narrow * Price/Fair Value: 1.08 * Morningstar Uncertainty Rating: High * Morningstar Rating: 3 Stars TechnipFMC * Morningstar Economic Moat Rating: None tps www momingstarconvatles/1191377/33-undervalued-stocks-for-q1-2023 m61123, 149.0 {33 Undervalued Stocks | Momingstar * Price/Fair Value: 0.81 * Morningstar Uncertainty Rating: Very High * Morningstar Rating: 4 Stars Favorite Financial-Services Stocks Financial-services stocks outperformed the broader market last year. The average financial-services stock we cover is about 10% undervalued, reports Morningstar sector director Michael Wong. About 45% of the financial- services stocks we cover are trading below their fair values, with the most opportunities among the credit services firms and banks. Berkshire Hathaway * Morningstar Economic Moat Rating: Wide * Price/Fair Value: 0.84 * Morningstar Uncertainty Rating: Low * Morningstar Rating: 4 Stars Blackstone * Morningstar Economic Moat Rating: Narrow * Price/Fair Value: 0.65 * Morningstar Uncertainty Rating: High * Morningstar Rating: 4 Stars Citigroup * Morningstar Economic Moat Rating: None * Price/Fair Value: 0.60 * Morningstar Uncertainty Rating: Medium * Morningstar Rating: 5 Stars Top Stock Picks in Healthcare Healthcare stocks held up better than the overall market last year— which isn't surprising, given their defensive nature. What is surprising: The average healthcare stock we cover is about 11% undervalued, reports Morningstar sector director Damien Conover. Healthcare stocks look undervalued across most industries, with more than half the stocks in the medical devices, tps www momingstarconvatles/1191377/33-undervalued-stocks-for-q1-2023 an1123, 149.0 {33 Undervalued Stocks | Momingstar biotechnology, and providers and services industries trading in 4- and 5-star range. Mumina * Morningstar Economic Moat Rating: Narrow + Price/Fair Value: 0.66 * Morningstar Uncertainty Rating: High * Morningstar Rating: 4 Stars Moderna * Morningstar Economic Moat Rating: None *— Price/Fair Value: 0.68 * Morningstar Uncertainty Rating: Very High * Morningstar Rating: 4 Stars Zimmer Biomet * Morningstar Economic Moat Rating: Wide * Price/Fair Value: 0.73 * Morningstar Uncertainty Rating: Medium * Morningstar Rating: 4 Stars Best Industrials Stocks Industrials stocks outperformed the broader market during in 2022, and the sector is about fairly valued coming into the new year. Still, about half of the conglomerates and industrial products stocks are trading at 4- and 5-star levels, says Morningstar sector director Brian Bernard. Meanwhile, none of the stocks we cover in the aerospace and defense industry are undervalued. FedEx * Morningstar Economic Moat Rating: Narrow * Price/Fair Value: 0.80 * Morningstar Uncertainty Rating: High * Morningstar Rating: 4 Stars tps www momingstarconvatles/1191377/33-undervalued-stocks-for-q1-2023 961123, 149.0 33 Undervalued Stocks | Momingstar Fortune Brands Innovations * Morningstar Economic Moat Rating: Narrow * Price/Fair Value: 0.73 * Morningstar Uncertainty Rating: Medium * Morningstar Rating: 4 Stars Southwest Airlines * Morningstar Economic Moat Rating: None * Price/Fair Value: 0.60 * Morningstar Uncertainty Rating: High * Morningstar Rating: 4 Stars Top Stocks in the Real Estate Sector Real estate stocks underperformed the broad market last year; the sector is now trading at a 25% discount to our fair value estimate, with more than two thirds of the names in the sector trading in either 4- or 5-star range. Rising interest rates have led to a decline in the sector's performance despite strong fundamental growth, says Morningstar senior equity analyst Kevin Brown. Park Hotels & Resorts * Morningstar Economic Moat Rating: None * Price/Fair Value: 0.42 * Morningstar Uncertainty Rating: High * Morningstar Rating: 5 Stars Simon Property Group * Morningstar Economic Moat Rating: None * Price/Fair Value: 0.73 * Morningstar Uncertainty Rating: Medium * Morningstar Rating: 4 Stars Ventas * Morningstar Economic Moat Rating: None tps www momingstarconvatles/1191377/33-undervalued-stocks-for-q1-2023 s0n61123, 149.0 {33 Undervalued Stocks | Momingstar * Price/Fair Value: 0.65 * Morningstar Uncertainty Rating: Medium * Morningstar Rating: 5 Stars High-Quality Technology Stock Picks Technology stocks struggled versus the broader market in 2022, leaving the tech sector trading about 20% below our fair value estimate going into the new year, explains Morningstar sector director Brian Colello. Software stocks are the most attractive industry, about 23% undervalued. Semiconductor stocks are trading at a 12% discount to fair value, and hardware stocks are at a 15% discount. ASML Holding * Morningstar Economic Moat Rating: Wide * Price/Fair Value: 0.78 * Morningstar Uncertainty Rating: Medium * Morningstar Rating: 4 Stars Salesforce * Morningstar Economic Moat Rating: Wide * Price/Fair Value 0.60 * Morningstar Uncertainty Rating: High * Morningstar Rating: 4 Stars ServiceNow * Morningstar Economic Moat Rating: Wide * Price/Fair Value: 0.61 * Morningstar Uncertainty Rating: High * Morningstar Rating: 4 Stars Best Stocks Today in the Util Sector Utilities stocks finished 2022 flat, outperforming the broader market for the year despite high inflation and rising interest rates. The sector is about 5% overvalued, argues Morningstar senior analyst Travis Miller. While most utilities stocks trade near our fair value estimates, there are a few tps www momingstarconvatles/1191377/33-undervalued-stocks-for-q1-2023 ane1123, 149.0 {33 Undervalued Stocks | Momingstar opportunities among independent power producers and fewer standouts among regulated utilities Alliant Energy * Morningstar Economic Moat Rating: Narrow * Price/Fair Value: 0.95 * Morningstar Uncertainty Rating: Low * Morningstar Rating: 4 Stars Edison International * Morningstar Economic Moat Rating: Narrow * Price/Fair Value: 0.87 * Morningstar Uncertainty Rating: Medium * Morningstar Rating: 4 Stars NiSource * Morningstar Economic Moat Rating: Narrow * Price/Fair Value: 0.86 * Morningstar Uncertainty Rating: Low * Morningstar Rating: 4 Stars How to Find Undervalued Stocks Undervalued stocks are those that trade below what they're worth. Investors can turn to several metrics to gauge a stock's worth. Some investors use standard metrics, such as price/earnings or price/cash flow. Others may look at a stock's price relative to a company’s future growth prospects, or where a stock is trading relative to its 52-week high price At Morningstar, we define undervalued stocks as those that are trading below our calculated fair value estimate, adjusted for what we call uncertainty— both of which are wrapped into the Morningstar Rating for stocks. Stocks rated 4 and 5 stars are undervalued; those rated 3 stars are fairly valued; and those rated 1 or 2 stars are overvalued. For more about how we calculate our fair value estimates, think about the Morningstar Uncertainty Rating, and more, read Morningstar's Guide to Stock Investing. tps www momingstarconvatles/1191377133-undervalued-stocks-for-q1-2023 1206+1123, 1:49.00 33 Undervalued Stocks | Momingstar Morningstar Investor members have access to lists of 5-star stocks and 4-star stocks and can use the Morningstar Investor screener to find undervalued stocks based on their own criteria. Remove the guesswork and make informed decisions faster. Morningstar Investor's stack ratings, analysis, and insights are all backed by our transparent, meticulous methodology. Learn more and start a seven-day free trial today. SHARE THIS ARTICLE OO® Susan Dziubinski does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar's editorial policies. Securities Mentioned ‘Tyson Foods TSN Boston Beer Company SAM Zimmer Biomet Holdings 7B FedEx Corp Fox Berkshire Hathaway BRK/A Southwest Airlines Co wy Blackstone 8x Exxon Mobil Corp xOM Ecolab Fo Ventas VIR Walt Disney Company (The) ols nips:iwww-momningstarcomiarticles!1131377/33-undervalued-stocks-fr-97-2023 $66.07 481.71 (2.66%) $328.70 $4.18 (1.29%) $125.70 1 $0.38 (-0.30%) $185.77 $4.49 (2.48%) $481,955.00 ‘ $8295.00 (1.75%) $35.08 $1.55 (4.62%) $79.22 1 $2.63 (3.43%) $110.53, 4 $1.32 (1.21%) $149.46 4 $4.63 (3.20%) $47.82 7 $1.06 (227%) $93.92 $2.00 (2.18%) 1386+1123, 1:49.00 33 Undervalued Stocks | Momingstar TechnipFMC ple Il Simon Property Group SPG Hanesbrands Hal Citigroup c Edison International eK Equitrans Midstream Corp ETN SERVICENOW Now Fortune Brands Innovations aN ASMIL Holding NV ASML Moderna MRNA VF Corp VFC Celanese Corp ce NiSource NI Hain Celestial Group HAIN Salesforce cM Comcast Corp CMCSA Alphabet GOOGL Lithium Americas Corp lac Mlumina UMN nips:iwww-momningstarcomiarticles!1131377/33-undervalued-stocks-fr-97-2023 $12.44 4 $0.62 (5.25%) $118.87 481.45 (1.23%) $7.43 $0.21 (2.91%) $47.31 4 $0.56 (1.20%) $66.87 $1.98 (3.05%) $7.03 $0.17 (2.46%) $366.53, $0.21 (0.06%) $60.87 4 $1.57 (265%) $595.85 $30.53 (5.40%) $180.35, 7 $6.84 (3.94%) $29.54 $0.09 (0.31%) $116.62 4 $5.76 (5.20%) $27.61 $0.48 (1.77%) $17.85 7 $0.64 (3.72%) $140.51 $4.17 (3.06%) $37.89 4 $0.91 (2.46%) $87.34 4 $1.14 (1.32%) $18.94 4 $0.25 (1.34%) $201.87 $0.72 (0.36%) 186+1123, 1:49.00 33 Undervalued Stocks | Momingstar Park Hotels & Resorts $11.94 PK $0.59 (5.20%) Carnival Corp $9.20 ceL $0.25 (2.79%) Alliant Energy Corp $55.35 UNT ‘$1.22 (2.25%) Sponsor Center ee enable conten pers deeded ST oa note Tumors pence i tery ey Transparency is our policy. 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