Investors are always on the hunt for undervalued S&P 500 stocks. However, for those who believe in the efficient market hypothesis, such value can be rarely be found in a market that prices in everything.
Wall Street analysts generally attempt to provide independent commentary on where they see stocks headed over the next year or so. Using various models and assumptions, these price targets can be helpful for individual investors.
That said, many of the inputs used by analysts are based, at least in part, on lagging data. Predicting the future isn’t easy, and no one has a crystal ball. Accordingly, finding true value implies that some assumptions will be proven true over time.
These three blue-chip stocks have proven to be easier to forecast over time. Each company is encountering headwinds right now that the market is heavily pricing in. However, each company also has growth catalysts I think aren’t being appreciated nearly as much.
Here’s why I think these three companies represent undervalued S&P 500 stocks to buy before Wall Street catches on.
Undervalued S&P 500 Stocks: Berkshire Hathaway (BRK-B)
Warren Buffett, the man behind Berkshire Hathaway (NYSE:BRK-B), is a world-class investor. Often considered to be the greatest of all time, Buffett has incorporated a buy-and-hold strategy on companies that have proven to be value bets at particular points in time.
Whether we’re talking about American Express (NYSE:AXP), Coca-Cola (NYSE:KO) or Apple (NASDAQ:AAPL), Buffett’s Berkshire Hathaway is a conglomerate of some of the best companies in the world.
Along with partner Charlie Munger, Buffett has amassed an impressive growth rate over many decades. Indeed, from 1965 to 2021, Berkshire has provided an annual compounded return for investors of more than 20%. That’s roughly double the S&P 500, including dividends.
Most investors are generally bullish on Berkshire’s long-term prospects. That said, with earnings revisions expected to come down at some point, I think Berkshire could be a stock worth considering on any downgrades moving forward.
The House of Mouse continues to provide compelling upside for long-term investors. Disney (NYSE:DIS) is a world-class company, most known for its theme parks, which have recently been packed.
During the company’s most recent fiscal Q3 results, Disney posted 26% year-over-year growth, largely due to better-than-expected performance from its parks division. This division grew by 70% over the period, astounding even the most bullish Wall Street analysts.
However, for investors thinking long term, Disney’s streaming platform is the crown jewel. Disney+ added around 14.4 million new subscribers during this period. This brings Disney’s total to more than 152 million subscribers, leading the way in the streaming wars.
While competition remains hot and it’s still a money-losing business, I think that over time, Disney’s scale and content library will bode well for its streaming service. Along with the company’s other businesses, Disney is a no-brainer buy on any weakness moving forward.
Undervalued S&P 500 Stocks: JPMorgan Chase (JPM)
Finally, we have JPMorgan Chase (NYSE:JPM). JPMorgan is a leading global bank with incredible metrics. On the basis of assets under management, JPMorgan is the largest bank in the U.S. Additionally, at the end of Q2, it held $286 billion in stockholder equity and $3.8 trillion in assets.
This enormous size and scale really speaks for itself. For investors looking for lenders that are well-insulated against potential turmoil, size matters. We’ve all heard the term “too big to fail.” In this context, there’s no better option in the financials space than JPMorgan.
Now, JPMorgan does trade at a relative premium to many of its peers, at more than 12 times earnings. While still cheap relative to the S&P 500, it’s the company’s quality that lends to this valuation premium. Over time, I expect this premium to be sustained, with more in the way of dividends and buybacks bolstering its stock price.
A fundamentally sound company, JPMorgan could be due for a selloff, should recession fears prove true. However, in such a scenario, I think JPM stock is one worth picking up as the downgrades come in.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.