The US stock market finished 2025 up more than 17% according to the Morningstar US Market Index. At the start of 2026, stocks were trading 4% below our fair value estimate.
What might that mean for the year ahead?
“As we enter 2026, we anticipate further volatility. Artificial intelligence stocks require even stronger growth to support lofty valuations,” writes Morningstar Chief US Market Strategist David Sekera in his Q1 2026 stock market outlook. A new Federal Reserve chair in May, trade and tariff negotiations, and midterm elections will likely test investors’ resolve this year, too, he adds.
Which Stocks Are Most Undervalued?
Here’s how stock market valuations look through two different lenses:
- By investment style, small-value stocks are the most undervalued stocks, trading 23% below our fair value estimate. Meanwhile, mid-cap core and growth stocks look overvalued.
- By sector, consumer defensive and financial-services stocks look the most overvalued. Real estate, technology, energy, and communication-services stocks look most undervalued in the first quarter.
33 Stocks to Buy While They’re Undervalued
Here’s the new list of top underpriced stock picks from Morningstar’s analysts for the first quarter of 2026.
- Albemarle ALB
- Alliant Energy LNT
- Americold Realty Trust COLD
- Baker Hughes BKR
- Bath & Body Works BBWI
- Broadcom AVGO
- Broadridge Financial Solutions BR
- Campbell’s CPB
- CarMax KMX
- CNH Industrial CNH
- Comcast CMCSA
- Corteva CTVA
- Devon Energy DVN
- Eastman Chemical EMN
- Edison International EIX
- Elevance Health ELV
- Federal Realty Investment Trust FRT
- GE HealthCare Technologies GEHC
- Healthpeak Properties DOC
- IDEX IEX
- Iqvia IQV
- Kraft Heinz KHC
- LPL Financial LPLA
- Microsoft MSFT
- Mondelez International MDLZ
- NXP Semiconductors NXPI
- Omnicom Group OMC
- Portland General Electric POR
- SLB SLB
- Spin Master TOY
- TransUnion TRU
- Under Armour UA
- Walt Disney DIS
Here are some key metrics about each undervalued stock to buy and commentary about each sector. Data for the analyst stock picks is as of Jan. 9, 2026.
Basic-materials stocks performed on par with the broad market in 2025. Morningstar senior analyst Seth Goldstein reports that 55% of the stocks that Morningstar covers in the sector are trading with Morningstar Ratings of 4 or 5 stars. Three-fourths of the stocks in the chemicals and agriculture industries are underpriced.
The communication-services sector outperformed the broad market last year, driven largely by Alphabet GOOGL, which consumes 50% of the sector’s market cap, observes Morningstar sector director Michael Hodel. In particular, about half the stocks we cover in the telecom subsector are trading in 4- and 5-star range.
Consumer cyclical stocks underperformed the market in 2025. About 45% of the stocks that we cover in the sector are trading in the 4- and 5-star range, says Morningstar sector director Erin Lash. The deepest discounts lie in the apparel and travel and leisure industries, she adds.
Consumer defensive stocks lagged the market last year. Nearly half the companies we cover are trading in 4- or 5-star territory, says Morningstar’s Lash. We think the alcoholic beverages and consumer packaged goods industries are especially attractive.
Energy stocks significantly underperformed the broader market in 2025. Negative sentiment on oil prices has weighed down the sector, explains Morningstar director Josh Aguilar. The exploration and production subsector lays claim to the most undervalued names.
The financial-services sector outperformed the broad market last year. Morningstar sector director Sean Dunlop sees minimal pockets of value in the sector but notes that about a third of the companies in the capital markets industry look undervalued.
Healthcare stocks lagged the market in 2025. Most of the stocks in the healthcare plans industry look undervalued, reports Morningstar strategist Karen Andersen. And more than half the stocks in the provider and services industry are undervalued, too.
Industrials stocks edged out the broader market in 2025. While the sector overall looks fully valued, Morningstar sector director Brian Bernard reports that more than three-fourths of the stocks in the farm and heavy construction machinery industry look undervalued.
Real estate stocks badly lagged the broad market last year. About two-thirds of the names in the sector are trading in either the 4- or 5-star range, says Morningstar senior equity analyst Kevin Brown. Interest rate movements continue to drive the performance of REITs, in particular.
Technology stocks finished ahead of the broad market last year. We remain confident in secular tailwinds in tech, including cloud computing, artificial intelligence, and the long-term expansion of semiconductor demand, says Morningstar senior equity analyst Dan Romanoff. Software stocks, in particular, look undervalued.
Utilities stocks outperformed the market in 2025. Morningstar senior analysts Travis Miller and Andrew Bischof think that valuations are the biggest headwind for the sector this year: With utilities’ average dividend near historic lows and P/E multiples above long-term averages, utilities will need to deliver on earnings growth expectations.
How to Find Undervalued Stocks to Buy
Undervalued stocks are those that trade below what they’re worth. Investors can turn to several metrics to gauge a stock’s worth. Some investors use standard metrics, such as P/E or price/cash flow. Others may look at a stock’s price relative to a company’s future growth prospects or where a stock is trading relative to its 52-week high price.
At Morningstar, we define undervalued stocks as those that are trading below our calculated fair value estimate, adjusted for what we call uncertainty—both of which are wrapped into the Morningstar Rating for stocks. Stocks rated 4 and 5 stars are undervalued; those rated 3 stars are fairly valued; and those rated 1 or 2 stars are overvalued.