2 Stocks We Find Attractive
Our analysts have their eyes on these companies.
Speaker 1: Early in July, Morningstar's equity analysts updated their list of attractive ideas. Here's a look at two of the new additions.
Newcomer Carrier, a leading supplier of climate control and fire and security solutions, was spun off from United Technologies in April 2020. We initiated coverage of Carrier in late June with a narrow moat rating, stable moat trend, and a $32 per share fair value estimate. In our view, Carrier has the strongest overall product portfolio of the major HVAC players, which also includes Johnson Controls, Trane Technologies, and Lennox. Carrier has historically had the strongest profit margins in its peer group. And its growth prospects have greatly improved now that it's a stand-alone company with complete control over its capital allocation decisions. We see no reason that Carrier should trade at a discount to Trane, which has a similar, yet less comprehensive product portfolio and lower profit margins. While Carrier's stock price has appreciated significantly since it's spun off from United Technologies, we think the market hasn't fully appreciated the company's growth and free cash flow generation potential. We still see plenty of upside.
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