Updated
Updated · Business Insider · Jul 15
Morningstar Names 5 Undervalued Stocks as AI Rotation and Inflation Jitters Rock Markets
Updated
Updated · Business Insider · Jul 15

Morningstar Names 5 Undervalued Stocks as AI Rotation and Inflation Jitters Rock Markets

2 articles · Updated · Business Insider · Jul 15

Summary

  • Morningstar’s latest high-conviction list highlights five undervalued stocks—Microsoft, Charles Schwab, Broadcom, Clorox and Devon Energy—as investors hunt for bargains in a volatile market.
  • The firm said the picks come as traders rotate out of some AI chip and memory winners, while geopolitical tension, inflation noise and a busy earnings week cloud the second-half outlook.
  • Broadcom and Microsoft anchor the list’s AI exposure: Morningstar sees Broadcom trading 41% below fair value and says Microsoft sits at a 35% discount despite projected 15% compound annual revenue growth.
  • Clorox and Devon offer more defensive and cyclical value plays, with Clorox at a 39% discount on expected sales normalization and Devon at a 20% discount with roughly $44-a-barrel breakeven costs.
  • Schwab, newly added for the third quarter, was cited as a steadier financials bet after a rate-driven selloff that Morningstar said overly penalized the stock.

Insights

With Clorox cutting its profit outlook, what hidden value does Morningstar see that the market is missing?
If wide-moat stocks don't beat the market, is Morningstar's famed investment strategy now obsolete?
Can the historic AI investment boom survive persistent inflation and the threat of further Fed rate hikes?