Susan Ziubinski: Hi there! I’m Susan Ziubinski, co-host of the Morning Filter podcast. Since November, small-cap stocks have been performing better than their large-cap counterparts. Recently, Dave Sekera, Morningstar’s chief U.S. market strategist, shared insights on some of his favorite undervalued small-cap stocks during an episode. He mentioned Mosaic, Terex, and Sensata Technologies.
Today, we’re going to explore two more small-cap stocks that appear attractive right now. We think these could be among the best small company stocks for investors to consider.
Two More Small-Cap Stocks Worth Watching
- Lamb Weston
- Brown-Forman
First up is Lamb Weston. As the largest frozen potato producer in North America, they supply fries to many restaurants. Even though it operates in a niche area, we believe demand for frozen potatoes will maintain solid growth in the long run. Before the pandemic, the global demand was increasing by about 5% annually, and there are likely factors that will help it bounce back to similar growth rates. We rate Lamb Weston with a narrow economic moat due to its cost advantages and strong customer relationships. We think the stock is valued at around $80 per share.
The second stock, Brown-Forman, is another promising small company. It’s known for its premium spirits, including the well-known Jack Daniel’s Tennessee whiskey and other brands like Woodford Reserve and Old Forester. The strength of its brands gives the company a wide economic moat. However, weak demand in North America and Europe has impacted recent performance. While the short-term outlook isn’t great, we project a 3% annual sales growth over the next decade, backed by brand strength, innovation, and growth in emerging markets. It’s estimated that the stock is worth about $37 per share.
If you’re interested in more stock ideas, tune into The Morning Filter weekly on your favorite podcast platform. You can also check out Morningstar.com.
