Are there any strong buy stocks left in this market? As it turns out, the answer is “Yes.”
Despite huge rallies in the overall stock market indexes, there are still a variety of companies selling at steep discounts to what Wall Street views is fair value.
Research shop Morningstar maintains a list of five-star stocks. These are the cream of the crop when it comes to undervalued stocks that should be Wall Street favorites going forward.
These are three of Morningstar’s five-star stocks that are among the absolute best value picks to own in April 2024 and beyond.
JD.com (JD)
It seems like almost everything that could go right has gone right for the American technology sector. Semiconductors and AI are booming. The American economy remains strong, and investors have great enthusiasm toward American tech firms.
The exact opposite applies to China. Its economy is in a slump, geopolitical concerns are elevated, and many investors have declared that China is outright uninvestable.
I don’t want to make light of the risks. There are certainly real concerns about investing in China today.
But for e-commerce giant JD.com (NASDAQ:JD), all of these fears seem baked into the stock price and then some. JD stock has lost three-quarters of its value since its all-time high. That plunge comes even as profitability and top line revenues have hit new peaks over the past year. Furthermore, JD is guiding to additional growth in 2024 and the stock goes for just eight times forward earnings.
The macroeconomic environment for JD is difficult today. But the company’s strong brand, industry-leading logistics and rock-bottom valuation set shares up for massive gains when sentiment improves.
Ambev (ABEV)
Ambev (NYSE:ABEV) is the South American subsidiary of global macro brewing giant Anheuser-Busch Inbev (NYSE:BUD). Anheuser-Busch Inbev infamously tripped itself up last year with a series of marketing stumbles that led to consumer boycotts, and it has also dealt with labor strikes.
Thankfully, Ambev, which is headquartered in Brazil, has been sheltered from the backlash in the North American market. It also operates with a much more conservative balance sheet as the company maintains a net cash position. This has allowed Ambev to ride out the frequent economic volatility in Brazil, Argentina, and its other key markets.
Shares are trading near their 10-year lows today as investors are skeptical around the outlook for consumer spending in South America. This gives folks a deeply discounted way to profit from the inevitable recovery in sentiment around Brazilian stocks. Morningstar believes ABEV stock is 32% undervalued today.
Realty Income (O)
Realty Income (NYSE:O) is a real estate investment trust (REIT) known for its triple net lease model.
Triple net lease is a type of rental contract where the tenant rather than the owner pays for certain expenses such as taxes, insurance, and maintenance. Given the inflationary environment of the past four years, triple net lease REITs have been sheltered from higher operating costs.
Realty Income was prudent in divesting its office holdings several years ago. This allowed it to sidestep what’s turned into a major bust in that segment of the real estate landscape. Realty Income’s customer base today consists of stickier retail and industrial uses that have proven to hold up during prior recessions and economic disruptions.
Realty Income is known as the monthly dividend company, thanks to its long-standing monthly payout policy. In addition, it has raised its dividend for more than 25 consecutive years which makes it a great choice for growth and income investors.
Shares are currently discounted due to the rise in interest rates, and fears about a bust in commercial real estate. However, these fears are overblown, and O stock is sharply underpriced today.
On the date of publication, Ian Bezek held a long position in JD and ABEV stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
