10 Undervalued Stocks With 'Exponential' Growth Potential
We think investors are underestimating these companies, which are well-positioned to benefit from Morningstar analysts' nine 'exponential technology' themes.
If you could go back in time and invest in Apple (AAPL) before it launched the iPhone--when it was selling for less than $5 per share--you wouldn't hesitate. Or how about Amazon (AMZN)? If you had the foresight to predict that this online bookseller would revolutionize retail as we know it, you surely would have scooped up the shares for less than $10 per share in 2001.
Of course, it's difficult to predict which technologies will change our world and how long their influence will last. On top of that, it's often a challenge for investors to identify investable opportunities associated with these groundbreaking technologies.
The Morningstar Exponential Technologies Index focuses on finding high-growth companies that are in the early stages of developing technologies that are expected to have a broad impact on society and transform how we live and work. The index, which comprises 200 stocks, differs from other tech-focused indexes in a few important ways. For one, the holdings are not limited to the tech sector. They can come from any sector, as long as they are poised to benefit from one or more of the exponential tech themes listed below.
Another index, the Morningstar Exponential Technologies Moat Focus Index, is derived from the Exponential Technologies Index but uses quality and valuation screens to target high-quality companies, similar to our Morningstar Wide Moat Focus strategy. The Exponential Technologies Moat Focus Index uses the 200-stock Exponential Technologies Index as a starting point, but includes only the 50 cheapest wide- and narrow-moat stocks (as measured by price/fair value). You can see the holdings here.
Here we list the 10 cheapest high-quality stocks in the Exponential Technologies Moat Focus Index currently, along with the main theme or themes they are expected to benefit from.
The Morningstar Exponential Tech methodology incorporates Morningstar's fundamentals-based approach to equity research. With the help of Morningstar's equity research analysts, we currently identify nine exponential technology themes:
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Karen Wallace does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.