Many shares look expensive in today’s market, but there are still cheap stocks to be found — some of which can be held for the next 10 years, according to the pros. They shared with CNBC Pro their tips for picking cheap stocks that hold long-term promise, as well as their top picks. How to pick cheap stocks Morningstar’s Susan Dziubinski says she believes in owning stocks that offer “some sense of certainty” in terms of cash flow and company fundamentals. Specifically, the investment specialist favors companies that have “significant competitive advantages.” “We also prefer companies run by management teams with a history of making smart decisions when it comes to allocating capital,” she said. “But a great company isn’t always a great stock: We think it’s important to not overpay for a company’s stock.” Freddie Lait, chief investment officer at Latitude Investment Management, says a willingness to invest in some cyclical stocks is key. He said that, sometimes, “cyclical businesses can generate very, very strong, predictable long-term returns to that 10-year point. So if we buy a cyclical business, we do expect that we will own it for 10 to 15 years.” He looks for two qualities in companies: 1) those that are “structurally growing” and 2) those that are trading near the bottom of their cycles from a valuation perspective. Lait said one good example was U.S. banks , which he bought in 2016 — seven to eight years after the global financial crisis, when they were “completely out of favor.” They’ve risen 150% since then and he’s still holding them today, he added. Another two such sectors that investors could consider that are “cyclical opportunities” for those who are looking for growth are U.S. home building and energy, he said. Cheap stocks to hold for the long term Morningstar’s Dziubinski named three cheap stocks that investors can hold for the next decade: U.S. consumer health firm Kenvue , regional U.S. bank U.S. Bancorp , and medical equipment firm Zimmer Biomet . Lait, for his part, named one he has owned in the past decade and expects to own in the next. Here’s what they said about each stock. Kenvue Factors such as an aging population and growing emerging markets should provide tailwinds for Kenvue’s brands, which include Zyrtec, Listerine, Tylenol and Nicorette, Dziubinski said. “We think the company has established a wide economic moat, thanks to its brand reputation, customer loyalty, and cost advantages,” she said. Companies with wide economic moats are those Morningstar defines as having competitive advantages that are strong enough to fend off competition and earn high returns on capital for 20 years or more. U.S. Bancorp Morningstar says the bank is in “good financial health,” and has been one of the most profitable banks under its coverage. “Regional banks in the U.S. have experienced a good deal of volatility since March 2023, but Morningstar doesn’t have concerns about US Bancorp’s capital,” said Dziubinski. She pointed out that U.S. Bancorp has a good mix of fee-generating businesses, including payments, wealth management and mortgage banking. Zimmer Biomet The firm, which designs and makes orthopedic reconstructive implants, supplies and surgical equipment. is the leader in large joint reconstruction, Morningstar noted. Morningstar has given the company a wide economic moat rating thanks to switching costs — which it says are substantial for orthopedic surgeons — and intellectual property around the company’s product portfolio. “We expect that the aging population and improving technology that can be used with younger patients will lead to solid demand for large-joint replacement,” said Dziubinski. AutoZone Lait of Latitude Investment Management said U.S. automotive parts retailer AutoZone was a cheaper stock he has owned since 2009 and would be comfortable staying with it for the next five to 10 years. He says it is “highly durable,” can generate consistent earnings, has grown fast and will likely continue to do so.
Cheap stocks to buy and hold for the next decade, according to the pros
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