While the economy has largely resisted the Federal Reserve’s interest rate hikes thus far, some experts remain concerned about the possibility of a recession.
“Upbeat inflation data makes a soft landing feasible, but a recession could still happen,” said Preston Caldwell, Morningstar’s chief US economist, assessing the next six months. “The probability of a formal recession being declared is about one-third.”
morning star together a list of the 10 most undervalued recession-resistant stocks. It measures valuation in accordance with its analysts’ fair value estimates.
Recession-resistant companies are those “whose products and services consumers will continue to buy regardless of the economic climate,” writes Susan Dziubinski, investment specialist at Morningstar.
“In a slowing economy, consumers in general will continue to fill their prescriptions, seek medical attention, practice good hygiene, and enjoy their favorite beverages and snacks,” he said. “They will also continue to pay for running water, electricity and gas to heat their homes.
In addition, “recession-proof companies tend to be financially sound and highly profitable, two qualities appreciated when economic times get tough,” Dziubinski said.
Morningstar’s list includes stocks in industries that are relatively immune to economic cycles: health care, consumer advocacy and utilities. Teams have wide moats or enduring competitive advantages.
Most Undervalued Stocks Listed
Here’s the list, in the order that shares were most undervalued compared to Morningstar’s fair value estimates as of January 20. The most underrated appear first.
- Anheuser-Busch InBev (OUTBREAK) – Get a free reportthe belgian brewing company
- Roche Holding (RHHBY) Swiss pharmaceutical company
- GSK (GSK) – Get a free reportUK pharmaceutical company
- ZimmerBiomet (ZBH) – Get a free reporta medical device company
- Medtronic (MDT) – Get a free reporta medical equipment company
- ambev (Bev) – Get a free reportthe beer company
- imperial marks IMBBY, a UK tobacco company
- Bayern (BAYRY) – Get a free reporta German healthcare company
- british american tobacco (BTI) – Get a free reporta UK tobacco company
- domain energy (D.) – Get a free reporta utility
Anheuser-Busch: Morningstar analyst Philip Gorham puts the fair value of the stock at $90. It recently traded at $60.30.
“Anheuser-Busch InBev reported third-quarter results that were broadly consistent with our forecasts,” he wrote in a comment.
“At a time when consumer products companies are passing material cost increases onto consumers, who are already facing higher interest rates and energy prices, we view a quarter in line as good news,” he wrote. Gorman.
In addition, “the scale of the company’s business and its strong relationships with its suppliers make this a high-quality franchise,” Gorham said.
Health care is high on the list
Roche: Morningstar analyst Karen Andersen puts the fair value of the stock at $57. It recently traded at $40.
Excluding covid products, third-quarter revenue grew: 2% in the pharmaceutical category and 7% in diagnostics, he wrote in a comment.
That “demonstrates the strength of the company’s underlying portfolio, despite continued pressure for biosimilar versions of various drugs,” Andersen said.
“Following positive data from Regeneron for high doses of Eylea (a drug for macular degeneration), we remain optimistic about the launch of Roche’s new ophthalmic drug, Vabysmo, as well as new blood cancer launches that should start boost sales in 2023”.
