Susan Dziubinski: I’m Susan Dziubinski with Morningstar. Today, we’re talking about three stocks that two of the best active fund managers recently took positions in. Morningstar thinks all of these stocks look undervalued today.
Top Fund Managers Are Buying These 3 Cheap Stocks
Adobe ADBEGeneral Mills GIS Constellation Brands STZ
The team at Diamond Hill Large Cap Fund DHLAX takes a disciplined, bottom-up approach to finding companies whose stocks are trading below their intrinsic values, and the team sells those stocks once they reach their intrinsic values, no matter how much they may still like the business. The managers favor companies with stable cash flows and defensible competitive advantages.
Read Morningstar’s full report on Diamond Hill Large Cap.
They recently added Adobe ADBE and General Mills GIS to the portfolio. Adobe has developed the most comprehensive portfolio of tools used in print, digital, and video content creation, and the company’s artificial intelligence solution, Firefly, should also attract new users. Morningstar thinks Adobe has carved out a wide economic moat, which means we think its competitive advantages will last for 20 years or more. Adobe stock looks undervalued today.
Read Morningstar’s full report on Adobe.
General Mills is also known for its portfolio. In this case, it’s a portfolio of top-selling packaged-food brands, including Cheerios, Pillsbury, and Betty Crocker, to name a few. The company has done a good job of investing in research, development, and marketing, which has allowed its products to sell well and continues to enhance the company’s relationship with retailers. Morningstar thinks General Mills has a narrow economic moat, which means we think the company will remain competitive for at least the next decade. General Mills stock looks undervalued today.
Read Morningstar’s full report on General Mills.
Another topnotch fund management team, Bill Nygren and his colleagues at Oakmark Fund OAKMX, also picked up an undervalued stock recently. At Oakmark, the managers favor large-cap stocks trading at least 30% below their assessment of intrinsic value. The team focuses on companies run by managers who think like owners.
Read Morningstar’s full report on Oakmark Fund.
So, what stock did the Oakmark Fund team buy? They recently initiated a position in Constellation Brands STZ. The company is the largest provider of alcoholic beverages across the beer, wine, and spirits categories in the US, but it generates the bulk of its revenue from Mexican beer imports, including top-selling brands Modelo and Corona. Morningstar thinks Constellation Brands has carved out a wide economic moat, and we think that beer innovation and distribution gains will return the company’s sales growth to a mid-single-digit rate over time. The stock looks cheap relative to Morningstar’s fair value estimate.
Read Morningstar’s full report on Constellation Brands.
For more stock ideas, visit Morningstar.com.
Morningstar principal Dan Culloton, strategist Kris Inton, associate director Tony Thomas, senior analyst Dan Romanoff, and analyst Dan Su provided the research behind this segment.
Watch This Warren Buffett Stock to Own Forever Is a Buy Today for Susan Dziubinski.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
