5 Best Buys for Early 2025

Author

Kenny
January 17, 2025

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5 Best Buys for Early 2025

Welcome to Money Masters!

Investors looking to capitalize on early 2025 market trends have several compelling opportunities to consider. From tech leaders revolutionizing AI to undervalued energy giants, these stocks offer a mix of growth, stability, and income potential. Here are five standout picks by Morningstar experts that could make a strong addition to your portfolio this quarter.

Let’s dive in.

THE MONEY IDEA💡
5 Best Buys for Early 2025

Exxon Mobil is a standout in the energy sector, with attractive valuation and strong fundamentals:

  • Valuation Upside: Trades at a 21% discount to fair value, making it an appealing choice in the energy space.

  • Dividend Income: Offers a robust 3.7% yield, providing steady income for investors.

  • Integrated Business Model: Delivers a cost advantage through its well-diversified operations across the energy value chain.

  • Inflation Hedge: Energy stocks like Exxon serve as natural hedges against inflation and geopolitical risks.

  • Market Mispricing: The market appears overly pessimistic about long-term oil prices and demand, presenting an opportunity for long-term investors.

U.S. Bancorp—the only wide-moat regional bank in the U.S.—stands out as a solid financial sector pick:

  • Attractive Valuation: Trades at an 11% discount to fair value, nearing a 4-star rating.

  • Dividend Yield: Provides a healthy 4.2% yield, offering reliable income for shareholders.

  • Wide Moat: Strong competitive positioning supported by cost advantages and customer switching costs.

  • Efficient Operations: Boasts a top-tier efficiency ratio and strong deposit base.

  • Resilience and Stability: Despite lagging behind larger peers in stock performance, U.S. Bancorp’s fundamentals remain robust, presenting an attractive entry point.

Despite recent challenges, Polaris—a leader in power sports—offers a deep value opportunity:

  • Massive Discount: Trades at a 50% discount to fair value, providing significant upside potential for value-oriented investors.

  • Strong Market Position: Leading market share in ATVs, side-by-sides, and snowmobiles, supported by strong brand recognition.

  • Dividend Yield: A healthy yield of 4.9% offers income stability for shareholders.

  • Post-Pandemic Recovery: Expected normalization in demand and margins by 2027 as pandemic-driven disruptions subside.

  • Strategic Resilience: Focus on innovation and operational efficiency to navigate current headwinds and capitalize on future growth.

Corteva, a leader in agricultural biotechnology, presents an attractive opportunity for investors:

  • Undervalued Stock: Trades at an 18% discount to fair value, with significant growth potential.

  • Wide Moat: Patented biotech seeds and crop protection products provide pricing power and competitive advantages.

  • Margin Expansion Story: EBITDA margins are forecasted to rise from 20% in 2023 to 24% by 2028, driven by higher-margin products.

  • Growth in Agricultural Innovation: Supports farmers in improving yields and reducing costs, addressing global food security challenges.

  • Dividend Stability: While the dividend yield is modest at 1.2%, it adds a layer of reliability for long-term investors.

Alphabet remains a compelling investment choice, thanks to its strong positioning in technology and AI. Here are the key benefits:

  • Valuation Discount: Trades at a 13% discount to Morningstar’s fair value estimate, offering significant upside potential.

  • Wide Economic Moat: Benefits from four of the five moat sources—intangible assets, network effects, cost advantages, and switching costs—providing strong competitive advantages.

  • AI Leadership: Positioned as a long-term beneficiary of artificial intelligence, leveraging its extensive resources and expertise in this transformative sector.

  • Antitrust Resilience: Analysts believe that the antitrust cases against Alphabet are unlikely to result in drastic changes, with potential remedies expected to be manageable.

  • Portfolio Staple: Offers exposure to large-cap technology with a balance of growth and stability, making it a solid addition to diversified portfolios.

The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.

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