2 Cheap Stocks Top Managers Have Been Buying

Susan Dziubinski: I’m Susan Dziubinski with Morningstar. Today, we’re talking about a couple of stocks that two of the best active fund managers around recently took positions in. Morningstar thinks both of these stocks look undervalued today.

2 Cheap Stocks Top Managers Have Been Buying

1. Nike NKE
2. Humana HUM

The managers at Loomis Sayles Growth Fund LSGRX focus on large-cap growth stocks of companies with enduring competitive advantages. They then look for opportunities where there are disconnects between a company’s fundamentals and the price of its stock. The team recently established a new position in Nike NKE.

As the world’s largest athletic apparel and footwear company, Nike certainly has those enduring competitive advantages that the Loomis Sayles team looks for. But Nike is struggling: The company experienced basically zero sales growth in fiscal 2024, and Nike’s management guided to lower revenue in fiscal 2025. The company recently pulled Nike veteran Elliott Hill out of retirement to assume the role of CEO in mid-October. Morningstar expects Nike to face continued challenges in the short run, especially without a compelling new product to drive sales. But in the long run, we forecast mid-single-digit percentage sales growth and operating margins that improve to the high teens as the firm capitalizes on its strengths, including its leading share in all major sportswear markets, unmatched marketing, and a vast product lineup. Morningstar thinks Nike stock is worth $124 and it looks really undervalued today.

Meanwhile, the fund managers at Dodge & Cox Stock DODGX go against the consensus view on businesses they believe have competitive advantages, good growth potential, and talented executives. They recently established a new position in Humana HUM.

One of the largest private insurers in the United States, Humana focuses largely on serving elderly people thanks to its top-tier position in Medicare Advantage plans. Given US demographic trends and the increasing penetration of Medicare Advantage plans in the eligible population, Humana remains at the forefront of one of the fastest-growing areas in US medical insurance. While robust medical utilization trends are dampening Humana’s near-term prospects, Morningstar still has a solid view of its long-term opportunities. In fact, Humana is one of Morningstar’s top picks in the healthcare sector today, as it trades far below our $473 fair value estimate.

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Morningstar associate director Tony Thomas and senior analysts David Swartz and Julie Utterback provided the research behind this segment.

Watch 3 Wide-Moat Stocks to Buy for an Economic Slowdown for more from Susan Dziubinski.