In this article, we will discuss the 12 Undervalued Wide Moat Stocks to Buy According to Analysts.
As per BlackRock, European equity gains have managed to outpace the US to start 2025. Despite this, the asset manager expects the US to reclaim leadership this year as the corporate earnings strength and the AI theme broaden out. The US equities have long exceeded the performance of their global peers. BlackRock expects that this has been made possible because of deeper capital markets and relative deregulation which promote risk-taking. The US can keep its edge, despite the S&P 500 lagging so far this year.
Markets to Broaden Out in 2025, Says BofA
As per Savita Subramanian, head of US Equity and Quantitative Strategy for BofA Global Research, the market has been broadening out. Last year and the year before that, the mega-cap tech companies managed to outperform the rest of the S&P. However, in the current year, broader market trends are visible. As per Subramanian, higher productivity and reshoring of manufacturing to the US are the 2 positive forces that are expected to fuel potential market growth beyond the tech sector.
As per Reuters, the volatility is expected to increase due to tariff announcements, policy changes from President Donald Trump, and job cuts, resulting in uncertainty. Anthony Saglimbene, chief market strategist at Ameriprise Financial in Troy, Michigan, has a year-end forecast for the S&P 500 of 6,500 as his “base case.”
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
BlackRock Remains Overweight on US Stocks
BlackRock expects that mega-cap tech and other AI-linked stocks will keep driving the US equity returns, mainly as and when the AI adoption grows. That being said, there are signs of earnings strength broadening beyond technology. The analysts now anticipate tech to post 18% earnings growth this year in comparison to 11% for the broader index. As per the LSEG data, this is a smaller gap versus 2024.
Overall, strong economic growth, broadening of earnings growth and a quality tilt underpin the firm’s conviction and overweight in US stocks as compared to other regions. The valuations for the big tech are backed by healthy earnings, and less lofty valuations for several other sectors. As per Kristy Akullian, CFA, Head of iShares Investment Strategy, there are tailwinds potentially favoring US equities over the rest of the world, mainly large-cap companies. The relatively easy financial conditions, healthy consumer balance sheets, and the expectations of deregulation and tax cuts continue to support the positive view.
With this in mind, we will now have a look at the 12 Undervalued Wide Moat Stocks to Buy According to Analysts.
A financial analyst at his computer monitor, tracking the public company’s investments.
Our Methodology
To list the 12 Undervalued Wide Moat Stocks to Buy According to Analysts, we used a screener and sifted through several media reports to choose companies having an economic moat and that analysts see upside to. Next, we filtered out the ones that trade at a forward P/E of less than ~20.0x. Finally, the stocks are arranged in ascending order of their average upside potential, as of February 28.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
12 Undervalued Wide Moat Stocks to Buy According to Analysts
12) Chevron Corporation (NYSE:CVX)
Average Upside Potential: ~10.3%
Forward P/E as of February 28: ~14.0x
Number of Hedge Fund Holders: 81
Chevron Corporation (NYSE:CVX) is engaged in integrated energy and chemicals operations. The company’s economic moat revolves around its strong franchise, healthy supply chain capabilities, and cost efficiencies. Bloomberg reported that the company is exploring an opportunity to acquire Phillips 66’s stake in their 50-50 chemicals JV, CPChem, with activist Elliott Investment Management pushing for an exit. Chevron Corporation (NYSE:CVX)’s CEO Mike Wirth believes that chemicals have strong demand growth.
This is because more people continue to enter the middle class globally, and there is an increased need for energy-efficient, lightweight plastics in airplanes and vehicles, as highlighted by Wirth in an interview with Bloomberg T.V. CPChem has significant growth projects, such as $8.5 billion polymers facility in Orange, Texas, and $6 billion complex in Qatar. Notably, they will utilize low-cost ethane as feedstock, placing them in an advantageous position compared to plants in Europe and Asia that use naphtha. Chevron Corporation (NYSE:CVX) continues to be active in managing its portfolio, as highlighted by the recent Canadian divestment announcement. These strategic initiatives remain focused on optimizing Chevron Corporation (NYSE:CVX)’s asset base and are targeting high-return opportunities.
11) Wells Fargo & Company (NYSE:WFC)
Average Upside Potential: ~12.2%
Forward P/E as of February 28: ~13.5x
Number of Hedge Fund Holders: 96
Wells Fargo & Company (NYSE:WFC) is a financial services company, which provides diversified banking, investment, mortgage, and consumer and commercial finance products and services. The financial services giant enjoys a wide economic moat, stemming from the cost advantages and switching costs. Furthermore, its extensive branch network and healthy market position offer a solid foundation for growth. The focus on efficiency and cost-cutting initiatives resulted in improving operational performance, placing it well to capitalize on economic recovery.
Analyst Glenn Thum from Phillip Securities maintained a “Buy” rating on the company’s stock, providing a price target of $85.00. The rating is backed by a combination of factors, such as Wells Fargo & Company (NYSE:WFC)’s financial performance and strategic initiatives. As per the analyst, the outlook for 2025 is positive, with expected growth in NII due to loan expansion and reduced market funding costs, together with further decrease in expenses. Such factors, along with the continued increase in non-interest income, mainly in investment banking and trading activities, support the rating.
Elsewhere, Bank of America Securities also gave a “Buy” rating on Wells Fargo & Company (NYSE:WFC)’s stock with a price objective of $86.00. For FY 2025, the company expects net interest income to be ~1% – 3% higher than in 2024 and non-interest expense of ~$54.2 billion. Oakmark Funds, advised by Harris Associates, released its Q4 2024 investor letter. Here is what the fund said:
“Wells Fargo & Company (NYSE:WFC) was the top contributor during the quarter. The U.S.-headquartered diversified bank’s stock price rose after reporting what we see as solid third-quarter earnings where the company’s efficiency ratio continued to improve as expenses were well controlled. The fee income segment also performed well, growing 12%. In addition, Wells Fargo had the opportunity to repurchase $3.5 billion in shares during the period, bringing the full-year repurchase to roughly $16 billion. In November, the stock price continued its upward trend following the U.S. presidential election as investors are optimistic that the financials sector will benefit from looser regulations and lower corporate taxes, thus stimulating a better environment for dealmaking. We continue to believe that Wells Fargo is a competitively advantaged bank that can use its superior business mix and return potential to unlock further value.”
10) Caterpillar Inc. (NYSE:CAT)
Average Upside Potential: ~12.6%
Forward P/E as of February 28: ~17.1x
Number of Hedge Fund Holders: 62
Caterpillar Inc. (NYSE:CAT) is engaged in the manufacturing and selling of construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. Morningstar believes that the company has a wide economic moat, stemming from its significant intellectual property and customer switching costs. Analysts at DA Davidson upped Caterpillar Inc. (NYSE:CAT)’s price target to $357 from $350, keeping a “Neutral” rating. The firm believes that data centers and energy-related projects have been fueling the company’s business throughout all 3 segments.
The company’s brand remains synonymous with durability and reliability, adding significant value to its products. These factors are expected to help contribute to customer loyalty and drive incremental sales. Moving forward, Caterpillar Inc. (NYSE:CAT) is expected to gain significantly from the anticipated upturn in the equipment replacement cycle, mainly in the mining sector. This cycle is fueled by the aging of existing equipment fleets and the requirement for more efficient, technologically advanced machinery.
Given its market position with a healthy brand reputation, Caterpillar Inc. (NYSE:CAT) is well-placed to capture a significant share of this replacement demand. Diamond Hill Capital, an investment management company, released its Q3 2024 investor letter. Here is what the firm said:
“Other top Q3 contributors included HCA Healthcare and Caterpillar Inc. (NYSE:CAT). Heavy construction machinery manufacturer Caterpillar has held up better than industry peers against a challenging macroeconomic backdrop and a generally slowing construction environment.”
