In his most recent stock market outlook, Morningstar U.S. market strategist Dave Sekera says that after rebounding in 2023, growth stocks look overvalued today. He therefore suggests that investors underweight growth stocks heading into the new year and put new money toward value stocks instead, where he sees more opportunity.
3 of the Best Stocks for Value Investors to Buy Now
So we’re sharing three of the best cheap value stocks to buy today. These stocks have a few things in common. First, they all land in the value portion of the Morningstar Style Box. They’re also from companies that earn wide economic moat ratings from Morningstar—that means we think these companies have enduring competitive advantages. And lastly, these stocks are all trading well below Morningstar’s fair value estimates.
The first name on our list of cheap value stocks to buy is Medtronic MDT. Medtronic is the largest pure-play medical-device maker in the U.S. With a diversified portfolio of products aimed at a wide range of chronic diseases, the company is a key partner for its hospital customers. Medtronic recently received regulatory approval on several emerging technologies that we see as key drivers of future growth. And we like that management is pruning its portfolio to goose growth, too. We think shares are worth US$112 apiece, and they trade well below that.
The second cheap value stock on our list is Comcast CMCSA. Now, we expect only modest revenue growth over the next several years at Comcast: The company’s declining traditional television business largely offsets its modest customer gains in broadband, the adoption of its Peacock streaming service, and the expansion of its theme parks. Our key assumption is that Comcast maintains its position as the dominant internet access provider in most markets it serves, providing a solid foundation for the firm to build customer relationships and deliver strong pricing power over the next several years. We assign the stock a fair value estimate of US$60.
The final name on our list of cheap value stocks to buy is RTX RTX. This diversified aerospace and defense company is made up of three segments: Collins Aerospace, Pratt & Whitney, and Raytheon. Worries about the costs of inspecting and replacing core parts of more than a thousand Pratt & Whitney engines has weighed on RTX’s stock this year. But we think RTX can weather the financial impact thanks to its profitable and growing business. We expect RTX to benefit from secular aerospace growth and increasing defense budgets over the long term. We think RTX stock is worth US$112 per share.
Morningstar director Michael Hodel, senior analyst Debbie Wang, and analyst Nicolas Owens provided the research behind this segment.
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