Morningstar's top 10 for long-term value stocks

Growth stocks have outperformed value for more than 10 years, which may make value stocks more attractive now.

Sep 24, 2023 - 22:30

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Morningstar's top 10 for long-term value stocks

Growth stocks have beaten value for more than a decade, which may mean that now is a good time to pick up value stocks.

To be sure, you may want to wait for a correction in the equity markets to buy any stocks at all. But value stocks are worth a look in any case.

“Based on our valuations, we continue to advocate for an overweight position in value, and to underweight both the growth and core categories,” said Morningstar chief market strategist Dave Sekera. “From a price perspective, value stocks look like the better long-term investment in 2023.”

Morningstar put together a list of “the 10 best value stocks to buy for the long term.”

The stocks on this roster come from Morningstar’s list of the best companies to own for 2023. Companies on this list have wide Morningstar moat ratings, which means Morningstar believes they have competitive advantages for at least 20 years.

In addition, the companies have predictable cash flows, and their management teams make smart capital-allocation decisions, according to Morningstar. The stocks also are trading below the firm’s fair value estimates.

Here are the terrific 10, starting with the most undervalued as of Sept. 19.

Tobbacco, Banking, Aerospace

1. Imperial Brands (IMBBY) - Get Free Report, the world’s fourth largest tobacco company. Morningstar fair value estimate: $34. Friday’s closing price: $21.46.

Imperial Brands' most recent six-month results beat Morningstar’s estimate of operating income, though lagged a bit on revenue.

“Imperial appears to be delivering on its operational turnaround and seems likely to meet management's guidance this year and beyond,” wrote Morningstar analyst Philip Gorham.

2. U.S. Bancorp (USB) - Get Free Report, the biggest U.S. regional bank. Morningstar fair value estimate: $52. Friday’s closing price: $33.38.

“U.S. Bancorp has been one of the most profitable regional banks we cover,” wrote Morningstar analyst Eric Compton. “Few domestic competitors can match its operating efficiency and returns on equity over the past 15 years.”

3. RTX (RTX) - Get Free Report, an aerospace and defense-contracting company. Morningstar fair value estimate: $111. Friday’s closing price: $71.58.

“RTX can weather the financial impact” of the $5 billion charge it will take for inspecting and replacing airplane engines over the next couple years, wrote Morningstar analyst Nicolas Owens. That’s “thanks to its profitable and growing business.”