U.S. indices are hitting new all-time highs seemingly every week. Traders are enthusiastic, but some analysts are warning of a potential market bubble. In fact, if the Federal Reserve fails to deliver anticipated rate cuts, the market could be in for a significant correction. But fear not. For investors with a greater time horizon, there are still plenty of great opportunities at present. These seven long-term stocks to buy off solid value and are set to outperform the market.
That’s not just me saying it. All seven of these leading long-term stocks are Morningstar 5-star stock selections, meaning they are among the most undervalued stocks that the firm’s analysts see in the marketplace. Let’s dive into these top long-term stocks to own right now.
JD.com (JD)
JD.com (NASDAQ:JD) has almost entirely missed out in the recovery so far.
Many American tech and e-commerce companies are back at or near their all-time highs. Meanwhile, JD shares are going for around $25 each, which is more than 75% below the highs set back during the pandemic-era online shopping boom. Indeed, JD stock is trading back around its IPO price from a decade ago.
Despite the collapse in its share value, however, JD’s business is stronger than ever. Revenues have nearly doubled since 2019 and profits are up a lot more as the company has focused on efficiency. In fact, shares are going for around eight times forward earnings and offers an agreeable 2.6% dividend yield as well. And recent quarterly results have maintained the positive momentum.
It’s easy to come up with a laundry list of risk factors for the Chinese economy and tech sector right now. But if and when things do go right for the local economy, JD shares should skyrocket.
Pfizer (PFE)
Another one of the top long-term stocks to own, Pfizer (NYSE:PFE) has seen an unceremonious collapse in its share price. The pharma giant’s stock plunged from a peak of $60 in 2021 to less than half that now. Today, PFE stock sells for far less than it did in January 2020, long before anyone had started thinking about COVID-19 vaccines.
And sure, the vaccines aren’t generating the sorts of revenues now that they did in 2021 and 2022.
But Pfizer’s revenues are still far higher today than they were before the pandemic. Pfizer has reinvested a chunk of its vaccine windfall into its pipeline, and has a variety of other potential blockbuster drugs on the way.
Morningstar’s Damien Conover sees tremendous value in PFE stock; he believes shares are worth $42 each compared to their $27 share price at present. In addition, the stock yields more than 6%, making PFE shares a great long-term growth and income pick.
PayPal (PYPL)
PayPal (NASDAQ:PYPL) is a formative part of the worldwide e-commerce landscape. Since the early days of online shopping, PayPal has been a trusted check-out option and provider of various services to online merchants.
Over the years, PayPal has gone into adjacent fields such as shopping apps and mobile wallets. While there is plenty of competition emerging, PayPal has done an admirable job of building out its ecosystem to react to the changing consumer landscape.
Regardless, investors have dumped most of the payment stocks, PayPal included. Shares trade for a mere fraction of where they were back in 2021 during the e-commerce boom. Yet, PayPal’s profits and revenues continue to grow. At less than 12 times forward earnings, PYPL stock is a steal and is another one of the top long-term stocks to own.
British American Tobacco (BTI)
British American Tobacco (NYSE:BTI) is associated with the cigarette business. And cigarettes are understandably in dramatic long-term decline due to their considerable negative health impacts.
However, British American Tobacco isn’t sitting idly by. The company has invested more heavily than almost all other tobacco companies to reinvent itself from the inside. British American now aims to be the worldwide leader in nicotine in any form, be it heated not burned products, vaping, or other such safer delivery platforms.
British American Tobacco recently took a $31.5 billion writedown on its cigarette business. That shouldn’t be too surprising, as the value of those brands does in fact seem to be impaired. However, the future is in BTI’s safer nicotine alternatives. Meanwhile, the overall business is dirt cheap at less than seven times forward earnings while giving off a 9.5% dividend yield.
Realty Income (O)
Realty Income (NYSE:O) is a triple net lease REIT, which is a type of rental arrangement where the tenants — rather than the landlord — pay for key expenses such as maintenance and utilities. This arrangement has served Realty Income well during the recent inflationary period as it is sheltered from some rising costs that have plagued other landlords.
Regardless, most REITs, including Realty Income, have underperformed amid the current macroeconomic situation. Higher interest rates are a double whammy for REITs; it costs more to pay debt on the REIT’s buildings, and investors demand higher yields from their dividend stocks as the rates on risk-free alternatives rise.
All this has led O stock to fall well below fair value. Morningstar’s Kevin Brown believes the stock is worth $76/share today, whereas O stock currently trades for just $52. Brown believes Realty Income’s property portfolio is undervalued and that the REIT continues to have promising opportunities to acquire more buildings and expand its portfolio.
Estee Lauder (EL)
Estee Lauder (NYSE:EL) is one of the world’s leading cosmetic companies. It sells a vast array of beauty products around the globe and has marketing channels across various demographics and price points.
Normally, Estee Lauder has shown steady strong growth throughout the years. However, the firm’s results have lost their shine over the past 24 months.
There have been rapid changes in consumer demand in the cosmetics space as a result of the pandemic. Demand initially topped expectations as the global economy reopened.
But this demand proved short-lived and retailed ended up with too much unwanted inventory. A brutal downturn in the Asian market has hit Estee Lauder especially hard. At one point, EL stock was down close to 75% from its all-time highs as investors feared the absolute worst.
However, EL stock is now on the mend. The company’s most recent earnings report was well ahead of expectations and shares are rallying. Still, the stock is down by more than half from its 2021 peak, making this a great entry point for a leading long-term stock to own.
Yum China (YUMC)
JD.com isn’t the only Chinese stock offering deep value today. In fact, there are quite a few Chinese names selling far below their apparent fair values.
Of the bunch, Yum China (NYSE:YUMC) offers the most compelling outlook today. That’s because Yum China is not overly tied to the economy or political developments. It is the Chinese franchisor for fast food brands including KFC, Taco Bell, and Pizza Hut. Geopolitical challenges should have less impact on the fast-food market as compared to say real estate, e-commerce, or technology firms.
Regardless, due to broader macroeconomic concerns, YUMC stock has fallen more than 30% over the past year. This has pushed the company down to just 19 times forward earnings. That is a bargain for a company that is growing both revenues and earnings per share around 10% annually even during this Chinese economic slump. When the economy picks back up, Yum China shares should soar.
On the date of publication, Ian Bezek held a long position in JD, EL, PFE, and O stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
