Stocks are Undervalued - Here are 3 Top Sectors to Find a Deal

The market may stay volatile, but opportunities are there for adding to stocks. [Morningstar](?utm_source=eloqua&utm_medium=email&utm_campaign=newsletter_smartinvestor&utm_content=37280&elqTrackId=f653643557224480887637e699fd1cb9&elq=8cd4be4e2c404f26b57fee72aff86cb0&elqaid=37280&elqat=1&elqCampaignId=17460) [Smart Investor] Smart Investor [Tom Lauricella, chief markets editor]( Twitter: [@LauricellaTom]( [Tom Lauricella] As we continue to look back at the first half of 2022 and ahead to the rest of the year, it’s still remarkable just how bad a spell it has been for investors. Take the 865 U.S.-listed stocks covered by Morningstar’s analysts. As we [wrote about here]( of that group, 758 dropped in the second quarter and a whopping 301 fell by more than 20%. Or consider this, as we [highlighted in our recap]( on how the largest bond funds did in the second, quarter, Vanguard Total Bond – the biggest bond fund there is – is down 10.4% at mid year. That’s nearly four times the worst loss the fund has suffered in a calendar year since it was launched in 1986. So what to do now? As we [mentioned last week]( now is the time to take advantage of opportunities in the markets and for investors to take a close look at their portfolios. Stocks may still fall to new lows and volatility will likely continue, especially as the Federal Reserve [continues to raise rates](. Where to start? We’re highlighting some of our analysts' reports from sectors where they see lots of undervalued stocks. That includes technology, communications (think Google) and financials, where 70% of the names Morningstar analysts cover are cheap. Morningstar’s chief U.S. strategist, David Sekera says, in the past two decades, stocks have rarely been this undervalued. But with the economic uncertainties, it may be best to focus on the companies that Morningstar deems to have the strongest competitive advantages - aka “wide moat” names that have strong pricing power in an environment where inflation remains an issue. Check out Dave's column just below, and you can find all our quarter-end wraps and outlooks [here](. [After Tough Second Quarter, U.S. Stocks Look Cheap]( [After Tough Second Quarter, U.S. Stocks Look Cheap]( We think now is the time to be adding judiciously to equities, not reducing them. David Sekera [Read More]( Share: [facebook]( [twitter]( [linkedin]( ADVERTISEMENT [media]( [media] Markets and the Economy [For Tech Stocks, the Cloud Is the Silver Lining]( [For Tech Stocks, the Cloud Is the Silver Lining]( Amid broad macro troubles, high-quality software stocks are trading with a nice margin of safety. Brian Colello [Plenty of Opportunity in Communication Services Sector]( [Plenty of Opportunity in Communication Services Sector]( Alphabet continues to power ahead, masking broader underperformance of the group. Michael Hodel [Over 70% of Financial Stocks Undervalued]( [Over 70% of Financial Stocks Undervalued]( But charge-offs and declining fee revenue should offset any benefits of rising interest rates. Michael Wong [Markets Brief: Ahead of the Next CPI Report, More Signs Inflation is Peaking]( [Markets Brief: Ahead of the Next CPI Report, More Signs Inflation is Peaking]( Still, the Fed is expected to continue its aggressive push to raise interest rates. Sandy Ward [Economic Outlook: The Near Term Looks Rough, but We're Still Optimistic]( [Economic Outlook: The Near Term Looks Rough, but We're Still Optimistic]( We're more bullish than consensus on long-term GDP and expect inflation to fall much faster, too. Preston Caldwell [The Best- and Worst-Performing Stocks: Q2 2022]( [The Best- and Worst-Performing Stocks: Q2 2022]( Investors go on the defensive, leading to big gains for packaged-food stocks. Valuations cut in half for these technology and retail stocks, including Lyft and Snap. Jakir Hossain [How Did the Largest Equity Funds Do in the Second Quarter?]( [How Did the Largest Equity Funds Do in the Second Quarter?]( Investors in the most widely-held stock funds endured another down quarter. Katherine Lynch [How the Most Widely Held Bond Funds Did in the Second Quarter]( [How the Most Widely Held Bond Funds Did in the Second Quarter]( Rising rates, growing credit concerns leave investors with widespread losses. Katherine Lynch [Jobs Data Shows a Strong Economy Amid Recession Fears]( [Jobs Data Shows a Strong Economy Amid Recession Fears]( Wages provide reassuring news on inflation, but Fed still on track for more tightening. Lauren Solberg Chart of the Week [Chart of the Week]( [Chart of the Week]( [Read More]( Share: [facebook]( [twitter]( [linkedin]( Popular This Week [Your 2022 Midyear Portfolio Checkup]( How to review your investments against the backdrop of high inflation, rising interest rates, and a possible recession. Christine Benz [14 Charts on the Market’s Second-Quarter Performance]( For just the second time in 40 years, bonds and stocks both posted losses for two consecutive quarters. Lauren Solberg [Why Dodge & Cox Stock Is Among the Best Value Funds to Invest In]( Filled with large-cap value stocks and run by adept managers, this fund earns our top rating. Tony Thomas [How Is the Bucket Strategy Holding Up?]( It’s not too early to line up next-line reserves to replenish Bucket 1. Christine Benz [Can You Learn to Game the Market?]( Financial expert Tim Ranzetta describes the four C’s of financial education. Jessica Bebel Listen Now Get the latest investing insights and market updates with [Morningstar’s podcasts]( available on your iPhone, iPad, Android, PC, or smart speaker. Stay connected: [twitter]( [facebook]( [linkedin]( [instagram]( [YouTube]( [Apple News]( [View online]( | [See all newsletters]( | [Share your feedback]( [Unsubscribe]( from this newsletter. Or update your [email preferences](. © 2022 Morningstar, Inc. All Rights Reserved. 22 W. Washington St. Chicago, IL 60602