Four undervalued stocks as bulwark against uncertainty

One way to be defensive is to look for value opportunities arising out of the disconnect between stock prices of some quality names and their fair value estimates

Vikram Barhat 6 March, 2019 | 6:00PM

Stock markets are getting rocked by a raft of geopolitical events ranging from oil crisis to fears over global economic weakness, from the U.S.-China trade spat to the recent India-Pakistan military confrontation. Skittish investors still smarting from last year’s stock market losses, and unsure about the market’s direction this year, may be tempted to stay in cash.

However, given that both the S&P 500 and the S&P/TSX Composite Index have made double-digit gains for the year to date, as of February 27, being defensively picky may be more prudent than remaining on the side-lines. One of the ways to be defensive is to look for value opportunities arising out of the disconnect between stock prices of some quality names and their fair value estimates. The higher the fair value relative to a stock’s market price, the bigger the margin of safety and upside potential.

The following companies are rare opportunities in Morningstar’s extensive coverage spectrum, which includes more than 1,500 companies and nearly 99% of the firms in the S&P 500 index. Considering their growth potential, these stocks appear significantly undervalued as determined by Morningstar equity analysts. These companies have strong fundamentals, differentiated products and have the ability to weather economic turbulence. These picks, say Morningstar analysts, can see significant upside over the long term.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Allergan PLC  
British American Tobacco PLC ADR35.17 USD0.60
Enterprise Products Partners LP15.33 USD-4.19
Stericycle Inc60.55 USD-1.42

About Author

Vikram Barhat

Vikram Barhat  Vikram Barhat is a Toronto-based financial writer specializing in investing, stock markets, personal finance and other areas of the financial services industry. He also writes for CNBC, BBC, The Globe and Mail, and Toronto Star.

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