33 Undervalued Stocks (2024)

The U.S. stock market finished 2023 up a remarkable 26% as measured by the Morningstar US Market Index.

Heading into 2024, stocks look fairly valued, according to our metrics: Looking at a composite of the stocks Morningstar covers, the U.S. stock market is trading at a price/fair value of 1.00 at the end of 2023. In comparison, stocks were trading at a 16% discount to fair value at the start of 2023.

With the market trading around our fair value estimate, what might that mean for 2024? “While we forecast that the rate of economic growth will slow and stocks have already rallied and are nearing their highs, we still see multiple undervalued areas that provide relatively large margins of safety,” writes Morningstar Chief U.S. Market Strategist David Sekera in his first-quarter 2024 stock market outlook.

Here’s how stock market valuations look through a few different lenses:

• By investment style, small-value stocks are the most undervalued stocks right now, trading 29% below our fair value estimate. Meanwhile, large core stocks are 8% overvalued.
• By sector, technology, industrials, and consumer cyclical stocks look overvalued. The most undervalued sector heading into 2024 is communication services, trading 11% below our fair value estimate.
• By Morningstar Economic Moat Rating, which is a sign of a company’s competitive advantages, wide-moat stocks are overvalued by 1% while narrow- and no-moat stocks are undervalued by 2% and 5%, respectively.

33 Undervalued Stocks to Buy for Q1 2024

Here’s the list of Morningstar’s top underpriced stock picks for the first quarter of 2024.

1. Albemarle ALB
2. Allegion ALLE
3. APA APA
4. Charles Schwab SCHW
5. CNH Industrial CNHI
6. Cognizant Technology Solutions CTSH
7. Comcast CMCSA
8. Entergy ETR
9. Equitrans Midstream ETRN
10. Estee Lauder EL
11. Exxon Mobil XOM
12. Federal Realty Investment Trust FRT
13. FMC FMC
14. Hanesbrands HBI
15. Hasbro HAS
16. Illumina ILMN
17. WK Kellogg KLG
18. Moderna Therapeutics MRNA
19. Newmont NEM
20. NiSource NI
21. PayPal Holdings PYPL
22. Realty Income O
23. RTX RTX
24. Snowflake SNOW
25. Teradyne TER
26. Tyson Foods TSN
27. VF VFC
28. Ventas VTR
29. Verizon Communications VZ
30. Walt Disney DIS
31. WEC Energy WEC
32. Wells Fargo WFC
33. Zimmer Biomet ZBH

Here’s a brief summary of how valuations stack up across sectors, along with some key Morningstar metrics about each undervalued stock to buy. Individual stock data is as of Dec. 28, 2023.

Undervalued Basic-Materials Stocks

Basic-materials stocks underperformed the broader market in 2023 and are 7% undervalued heading into 2024. Morningstar strategist Seth Goldstein reports that nearly 60% of the stocks that Morningstar covers in the sector are trading with Morningstar Ratings of 4 or 5 stars. While building-materials stocks look overvalued, more than half of the stocks in the agriculture, chemicals, and metals and mining industries are underpriced.

Underpriced Communications-Services Stocks

The communication-services sector outperformed the broad market by about 20 percentage points in 2023. Yet, the sector enters 2024 trading 11% below our fair value estimate. While heavyweights Meta Platforms META and Alphabet GOOGL have soared, there is still opportunity in the sector, observes Morningstar sector director Mike Hodel. In particular, about three fourths of the stocks we cover in the telecom subsector are trading in 4- and 5-star range.

Cheap Consumer Cyclical Stocks Today

Consumer cyclical stocks outperformed the broader market in 2023. The sector enters 2024 trading 2% above our fair value estimate. Less than half of the stocks that we cover in the sector are trading in 4- and 5-star range, says Morningstar sector director Erin Lash. The auto and travel and leisure industries hold the most opportunities from a valuation perspective. Apparel stocks look appealing, too, as investors fixate on the industry’s short-term hurdles instead of its long-term profit prospects.

Undervalued Stocks in the Consumer Defensive Sector

Consumer defensive stocks dramatically lagged the market in 2023. The sector looks about fairly valued heading into 2024. Yet there are opportunities to be found, says Lash: In particular, more than half of the stocks we cover in the consumer packaged goods, alcoholic beverages, and tobacco industries are trading in 4- and 5-star range. Notably, we think retailers that continue to invest in their omnichannel capabilities will be better positioned to win over consumers long-term.

Underpriced Energy Stocks Right Now

Energy stocks struggled in 2023 on oil demand weakness. We expect the market to remain volatile until late 2024 as it remains laser-focused on potential gas supply disruptions, says Morningstar sector strategist Stephen Ellis. The energy sector looks about 8% undervalued today. About half of the names we cover in the integrated oil and gas industry look undervalued.

Undervalued Stocks: Financial Services

Although the financial-services sector bounced back from its lows during the regional banking crisis, the sector finished the year well behind the broader market. The sector is just 3% undervalued going into the new year. However, more than half of the bank and credit services stocks we cover are trading at 4- and 5-star levels, notes Morningstar sector director Michael Wong. While we expect a relatively stable economy and improving earnings for the financial-services sector in 2024, the lagged effect of tighter monetary policy from previous quarters on the economy remains a risk, he concludes.

Top Cheap Healthcare Stocks

Healthcare stocks performed poorly in 2023 yet as a group are only trading 3% below our fair value estimates heading into 2024. Opportunities do exist, though, particularly among healthcare plans, as well as providers and services and drug manufacturers, reports Morningstar sector director Damien Conover. We don’t think the market fully appreciates the innovation in the biotech and drugmaker group, in particular.

Inexpensive Industrials Stocks

Industrials stocks slightly lagged the broader market in 2023 and look 5% overvalued today. Morningstar sector director Brian Bernard reports that compelling investment opportunities remain across aerospace and defense, industrial products, construction, and farm and heavy construction machinery. Meanwhile, the industrial distribution and waste management subsectors hold less opportunity.

Overlooked Real Estate Stocks to Buy

Despite generating solid returns during the fourth quarter as interest rates eased, real estate stocks underperformed the market in 2023 and currently trade at an 8% discount to our fair value estimate. More than half of the names in the sector are trading in either the 4- or 5-star range, says Morningstar senior equity analyst Kevin Brown. We expect the trend of slowing but at or above average growth continuing in 2024, he adds.

Undervalued Technology Stocks for 2024

Technology stocks were the clear winners in 2023, with the sector gaining twice as much as the broad market. After its stunning run, the tech sector looks 9% overvalued heading into 2024. Morningstar senior analyst Dan Romanoff says there are still some select buying opportunities in semiconductors, hardware, and software―but not many. We think the most important catalyst for the sector in the new year revolves around generative artificial intelligence.

Underpriced Stocks: Utilities

Utilities stocks had a tough 2023; this was the only sector to finish the year in the red. The sector is 7% undervalued heading into 2024. About half of the stocks we cover in the sector are trading in buying range. We think the best positioned utilities are those in regions with strong energy demand growth and widespread support of clean energy investments, say Morningstar sector strategists Travis Miller and Andrew Bischof.

How to Find Undervalued Stocks to Buy

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.

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.

This article is part of Morningstar’s 2023 in Review and 2024 Market Outlook.