December 9, 2023

A Look at Morningstar’s Three Worst Stock Picks

You should generally avoid investing in these different stocks. Morningstar has chosen to highlight three of these companies. According to the opinions of a great number of market analysts, the state of the stock market at the beginning of the following year is likely to be very poor. This is due to the fact that it is increasingly likely that both inflation and short-term interest rates will continue to be high and the economy will continue to collapse.

Companies that have significant competitive advantages have more resilience in the face of economic uncertainty than companies that do not have significant competitive advantages, according to Susan Dziubinski, an investment expert at Morningstar. “companies that don’t have significant competitive advantages” Businesses that have “moats,” also known as sustainable advantages in the market, are favoured by the firm’s analysts.

She stated that the companies on the Morningstar list “see pricey to us” because they “don’t have economic moats” and are contending with headwinds in the present economic situation. Because of their high prices and limited economic safety, the stocks listed below are ones that we advise selling in preparation for the new year.

Old Dominion Freight Lines (ODFL) (Get Free Report) is the fourth-largest LTL carrier in terms of revenue.

In a commentary, he referred to the business as the “obvious industry leader in terms of execution, freight selection, and service quality,” three aspects that are extremely important for shippers. According to Matthew Young of Morningstar, the share is currently worth $201 at the current price.Recent transactions have taken place at a price of $294.

According to Dziubinski, “freight demand is slowing” as a result of customers shifting their spending away from goods and towards services, as well as fewer businesses refilling their shelves.

We anticipate a decrease in tonnage of just a few percentage points compared to the same time period in the prior year in the second half of this year. According to Young, moderation is taking place, “especially among retail end markets, making it easier for retailers to resupply.”

GlobalFoundries (GFS — Get Free Report) is a semiconductor manufacturing company.

An analyst at Morningstar named Abhinav Davuluri has determined that the stock is currently worth an estimated $45 at this moment. It was trading at $64 at the close of business on Tuesday, when the market was closed.

As he put it in a remark, 3.5 percent of the company’s customers are tied into contracts with a total value of more than $27 billion, which “provides visibility into future revenue growth and increases customer switching costs.” GlobalFoundries has benefited from enhanced material available on mobile devices.

Although we estimate that the negative impact will continue for some time, we also anticipate that GlobalFoundries’ top line will increase in 2023 as a result of new design wins and higher wafer prices. However, Davuluri advised managers that they “should expect macroeconomic and geopolitical instability to significantly affect the firm’s revenues in the first half of 2023.”

CF Industries (CF) — Get Free Report — is now the industry leader in the manufacture and distribution of nitrogen fertilizers.

Morningstar analyst Seth Goldstein believes that each share of the stock is currently worth $85 dollars.just placed at a price of $100.

As we get closer to the middle of the cycle in our projection, we believe that the balance of the drop in the price of nitrogen may be attributed to the decreasing price of natural gas in Europe, which is the feedstock that is used by companies with marginal costs. In a commentary, he stated, “We think the market is expecting higher nitrogen prices for longer.” (We believe the market is predicting higher nitrogen prices for longer.)

Despite the fact that he believes prices will continue to fall in the years to come, he believes prices will be 9% higher at the mid-cycle point. Since reaching a multi-year high in the second quarter, the price of nitrogen has fallen by more than thirty percent, according to Goldstein’s observations.

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