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2023 was the year of large-cap stocks, but 2024 may go down as the year small caps made their comeback. Small stocks, big possibilitiesEarlier this year, Bank of America’s head of US small & mid-cap strategy Jill Carey Hall outlined her take on so-called “SMID-cap” stocks in 2024. Her argument is simple: small-cap stocks are cheap, particularly value stocks, and they’re well-positioned to capitalize on market trends this year. Therefore, while small-cap stocks seem substantially cheaper than their large-cap counterparts, careful asset selection is needed, and we think it’s important to focus on quality.”10 best undervalued small-cap stocks to buyThere’s clearly an opportunity to be had in small-cap value stocks, though that opportunity still comes with its own risks. She recently compiled advice from Morningstar analysts into a list of the 10 best small-cap stocks to buy.
Persons: Jill Carey Hall, , ” Carey, , Dave Sekara, Wharton, Jeremey Siegel, I'm, ” Siegel, there’s, Sekara, Morningstar, Tyler Dann, Susan Dziubinski Organizations: Meta, Nvidia, Business, Bank of, ” Morningstar, CNBC, Morningstar
Wall Street doesn't expect the stock market to perform very well this year. Investors should look for value and find specific winners in 2024 rather than bet on the entire market. Bank of America found stocks that should benefit from Fed rate cuts and expand their margins. Then again, the broader stock market isn't expected to do much better either. Mid-caps trail closely behind at a 5% to 6% discount, but small-caps trade at a tantalizing 16% discount.
Persons: Dave Sekara Organizations: Bank of America, Morningstar, Business
Right now, they are the most attractive part of the market, trading at a 25% discount, he noted. "Initially, small caps were hit the hardest during the early stages of the pandemic," Sekara said. "I think a lot of people just worried if those companies would actually survive the pandemic or not, just because as small-cap stocks, they didn't have the same financial wherewithal as large-cap stocks." AdvertisementWhy small caps now? AdvertisementBelow are seven stocks from Morningstar's list of small-cap value stocks with five-star ratings.
Persons: , it's, Dave Sekara, Sekara, Morningstar Organizations: Service, Business, Google, Apple, Microsoft, Nvidia, Morningstar
The firm estimates fair value based on its projection of a company's future cash flows and the predictability of those flows. The best opportunities are now in value stocks that are trading at about a 22% discount to fair value, Sekara noted. Currently, the real estate sector is the most undervalued sector, with REITs trading at a 26% discount to fair value, Sekara said. Finally, American Tower (AMT), which owns and operates wireless and broadcast communications infrastructure, trades at a 24% discount to fair value. Two other five-star stocks that remain significantly undervalued are AT&T and Verizon, trading at a 35% discount to fair value.
Persons: Morningstar's Preston Caldwell, Caldwell, Dave Sekara, Sekara, Wells Organizations: Treasury, Morningstar, Simon Property Group, Realty Trust, Communications, Verizon, Citigroup, PNC, US Bank
"That represents an 8% discount to our fair value estimates." Sekara was among those who had to try and keep up with the surprising moves among growth stocks this year. Now, with growth stocks cheaper than they have been in months, he's back on the bandwagon. In a separate note published earlier this month, editor Susan Dziubinski polled Morningstar analysts for their top undervalued stocks to buy this quarter. The results are below, along with each company's ticker, latest closing price, price to fair value ratio, fair value uncertainty, and its economic moat rating.
Persons: David Sekara, Morningstar, Sekara, he's, Susan Dziubinski Organizations: Investor, Federal Reserve, Morningstar
The stock market began 2023 with a shaky start, but has since enjoyed a strong rally. It's been full speed ahead lately for stocks, as the ongoing market rally remains alive. On the whole, things certainly look promising — but beneath the surface it's clear that the stock market rally has been primarily driven by one sector: technology. 10 most undervalued high-quality stocksFaced with a looming economic downturn, pivoting towards high-quality stocks could help provide investors with the wherewithal to withstand an impending squeeze. In a note from June 27, Morningstar identified the 10 most undervalued high-quality stocks with lasting competitive advantages that make them attractive to long-term investors.
Persons: Morningstar, It's, Dave Sekera, Sekera
In a recent note, Morningstar shared its top 33 undervalued stocks to buy for the second quarter. While the near term may look difficult for investors, Sekera believes that these headwinds will force the Federal Reserve to pump the brakes on its rate-hiking program sooner rather than later. Valuations-wise, small-cap firms remain the cheapest, while mid-cap and large-cap stocks respectively remain just below and above market average. In a separate note, Morningstar analysts listed their top 33 undervalued stocks for the second quarter of 2023. The full list of names is below, along with each company's ticker, sector, market capitalization, and price versus fair value estimate.
Morningstar's Dave Sekera says it's a hard time for retail, but many stocks are too undervalued. He explained that a number of major retailers are trading for half of their fair value. Sign up for our newsletter to get the inside scoop on what traders are talking about — delivered daily to your inbox. Despite all that, Sekara thinks retail in general is getting oversold, with many stocks trading for just half of what Morningstar considers to be their fair value. Sekera named a series of stocks from across the retail and consumer technology spaces that have become overly cheap relative to Morningstar's fair value estimates.
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