Susan Dziubinski: Hi. I’m Susan Dziubinski, co-host of The Morning Filter podcast. On a recent episode, Morningstar’s Chief US Market Strategist Dave Sekera identified several stocks that’ve proven to be excellent stocks to own for decades. Think of them as “forever” stocks: Stocks that you can buy for the long-term and manage your position in over time. For more about how Dave screened for these stocks, watch the podcast episode via the link beneath this video.
Today, we’re looking at the forever stocks from Dave’s list that look fairly valued or overvalued today. These are great companies to own for a long time, maybe forever, but we don’t think they’re trading at attractive margins of safety today. So, instead of buying them at today’s prices, we suggest putting them on a forever stock watchlist instead.
3 Forever Stocks for Your Watchlist
The first forever stock for a watchlist is ExxonMobil. Morningstar assigns Exxon a narrow economic moat rating, and we think it’s the highest-quality integrated firm. Exxon is departing from industry trends by increasing spending relative to years past, with the goal of delivering $25 billion in earnings growth by 2030. Now, higher spending may give some pause, given the industry’s history of prioritizing growth over returns. But we think Exxon’s differentiated portfolio will allow it to pursue growth while maintaining capital discipline and delivering returns. We think ExxonMobil stock is worth $156.
Read Morningstar’s full report on ExxonMobil.
The second forever stock for a watchlist is Johnson & Johnson. We believe the company is one of the widest economic moats in the healthcare sector, supported by intellectual property and its drug business, and intellectual property and switching costs in its device segment. The drug business is seeing significant growth in new launches, which will counter patent expirations on older products. On the medical-device front, J&J is also innovating with contact lenses, minimally invasive surgical tools, and robotic instruments. We recently increased our fair value estimate on J&J to $190 per share, but the stock is trading well above that today.
Read Morningstar’s full report on Johnson & Johnson.
The final forever stock for a watchlist is Walmart. Walmart is the world’s largest retailer. We think it has carved out a wide economic moat based on its industry-leading cost structure and brand-intangible assets. The company’s done a great job of converting its store scale into digital traction, too, evidenced in part by its leading 32% online grocery share. Despite competition from Amazon and others, we think Walmart’s scale, data, and supply chain investments offer structural advantages to support long-term relevance and margin durability. However, we think Walmart’s stock is exceptionally overvalued today, trading at nearly twice our $62 fair value.
Read Morningstar’s full report on Walmart.
For more stock ideas, be sure to tune into The Morning Filter each week, wherever you get your podcasts. And visit Morningstar.com, too.
Morningstar directors Karen Andersen and Allen Good and analyst Brett Husslein provided the research behind this segment.
Watch 2 Stocks That Look at Risk if Inflation Rises for more from Susan Dziubinski.
