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These undervalued stocks have defensive qualities that make them attractive in today’s market.
00:00 Introduction
00:43 Bristol Myers Squibb BMY
01:22 Campbell Soup CPB
02:11 Microsoft MSFT
I’m Susan Dziubinski with Morningstar. The stock market has been volatile since early August as worries about an economic slowdown have intensified. Morningstar expects GDP growth to slow in 2024 and 2025.
As a result, now could be a good time to own stocks of companies with wide economic moats. Why? Well, wide-moat companies tend to have competitive advantages and pricing power that allow them to maintain profitability during tough economic times. They also tend to have more predictable cash flows no matter the economic climate, and they often operate in essential industries that are less sensitive to economic cycles.
Today we’re looking at wide moat companies whose stocks are undervalued.
The first undervalued wide moat stock on our list is Bristol Myers Squibb BMY. The drugmaker’s portfolio covers many therapeutic areas, including cardiovascular, cancer, and immune disorders – with a key focus in immuno-oncology, where the firm is a leader in drug development. We believe the market is undervaluing the ability of Bristol’s pipeline to offset generic pressures; in fact, we expect approval of Bristol’s schizophrenia drug and subcutaneous approval of its skin cancer drug to happen this year. And we’ll see phase 2 data for Bristol’s promising lung cancer drug this year, too. We think Bristol stock is worth $63.
The next undervalued wide moat stock on our list is Campbell Soup CPBt which recently changed its name to “Campbell.” These days, the company is about more than just soup; today it’s a leading packaged foods manufacturer with a portfolio of brands that also include Pepperidge Farm, Goldfish, Swanson, Prego, and others. The macro environment has been tough this year, but the company’s stringent cost management is yielding savings. And we expect the company will continue recognizing cost savings by removing complexity from operations, investing in automation, and optimizing its supply chain and manufacturing network. It will then put those savings towards investments in innovation and marketing, thereby supporting its relationships with retailers and consumers. We think Campbell’s stock is worth $61.
The final undervalued wide moat stock on our list is Microsoft MSFT. Microsoft’s wide economic moat stems from two segments specifically: productivity and business processes and intelligent cloud. Customers value Microsoft’s products as stand-alone solutions and for the company’s immense product breath, and Microsoft’s applications are tightly integrated with one another. As the company offers a wider set of related and compelling solutions, it'll become even more deeply entrenched in its customers as they adopt multiple products. Oh yeah, and did we mention Microsoft is a leader in AI, too? We think Microsoft stock is worth $490.
For more wide-moat stock ideas be sure to visit Morningstar.com and subscribe to Morningstar’s channel.
Morningstar directors Damien Conover and Erin Lash and senior analyst Dan Romanoff provided the research behind this segment.
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