According to Morningstar market strategist Lochlan Halloway, the recent market sell-off has created rare buying opportunities in certain blue-chip stocks. Halloway noted that the market appears generally content with the results reported thus far this reporting season. He indicated that Morningstar has upgraded fair value estimates for approximately 40% of stocks, a slightly higher proportion than in recent cycles, while downgrades remain contained at under 10%, marking a solid start to the season overall.
However, Halloway pointed out that CSL and James Hardie experienced particularly sharp declines, despite Morningstar’s previously positive outlook. CSL is a global biotechnology company that researches, develops, manufactures, and markets a range of plasma-derived therapies and vaccines. James Hardie is a global building materials company that manufactures and sells fibre cement and fibre gypsum building products.
While acknowledging the disappointing updates from both companies, Halloway believes the market’s reaction has been excessive. He stated that the subsequent sell-off presents an attractive entry point for investors, as these established businesses with strong track records now appear significantly undervalued. According to Morningstar’s stock ratings since 2012, James Hardie has only briefly traded at such a steep discount, and CSL has never looked this undervalued, suggesting a compelling investment opportunity.
