Reviewed by Gotrade Internal Analyst
Gotrade News - The 2026 selloff across US equities has opened up a rare window for bargain hunters. According to Morningstar analysts, at least five major stocks are now trading well below their estimated fair values after getting dragged down by AI panic and tariff uncertainty.
Dave Sekera, Morningstar's Chief US Market Strategist, argued that much of the selling has been driven by fear and uncertainty rather than any rigorous fundamental analysis. In The Morning Filter episode aired Monday (23/02), Sekera laid out five stock picks that he believes have pulled back way more than they should have.
Key Takeaways:
- Microsoft and Palo Alto Networks are each trading at 34% discounts to Morningstar's fair value after the software sector got hammered
- Morningstar sees AI fears around software, wealth management, and cybersecurity as largely overblown in the near term
- US GDP growth in 2025 came in far stronger than economists initially expected when tariffs were first announced, suggesting other factors matter more for the economy
Microsoft tops Sekera's list with a 5-star rating and a 34% discount to fair value. The stock has slid roughly 28% from its 52-week high, mostly on the assumption that AI will chip away at demand for Microsoft's software over time.
Sekera called that fear overdone, pointing out that Microsoft offers the best combo of stable, subscription-based revenue and meaningful AI upside through Azure. The stock is now going for 23 times its 2026 earnings estimate, well below its five-year average of 30 times.
Cybersecurity Actually Wins From AI
His second pick is Palo Alto Networks, also sitting at a 34% discount with a 4-star rating. Sekera made the case that cybersecurity stands to benefit from AI's rise, not get wiped out by it.
The logic is pretty straightforward — hackers using AI tools means the need for cybersecurity only grows from here. Morningstar rates Palo Alto with a wide economic moat built on network effects and switching costs, and projects earnings growth north of 30% annually over the next five years.
Amazon rounds out the top three with a 4-star rating and a 19% discount to Morningstar's fair value. The stock is down about 9% year-to-date, weighed down by concerns over the company's massive $200 billion capex plan for 2026.
But Sekera stressed that Amazon has a long track record of placing big bets on new tech and business lines — and winning. The mix of steady retail and Prime growth, a long runway for AWS, and booming ad revenue makes it attractive at under 30 times its 2026 earnings estimate.
The Rotation Into Value Is Already Underway
Sekera's final two picks are LPL Financial and Thermo Fisher Scientific, both carrying 4-star ratings. LPL Financial is trading at a steep 41% discount to fair value after getting caught up in the wealth management selloff, while Thermo Fisher sits at a 19% discount.
On LPL Financial, Sekera pushed back hard against the idea that AI will replace financial advisors anytime soon. Robo-advising has been around for over a decade now, and it still hasn't taken any meaningful share away from human advisors.
As for Thermo Fisher, Morningstar's analyst thinks the market overreacted to a slight dip in operating margins that was likely a short-term tariff hit. The stock is trading below 20 times its 2026 earnings estimate, compared to a historical average above 25 times.
Sekera also dropped some important context on how tariffs have actually played out economically. US real GDP in 2025 grew much stronger than anyone predicted, clocking in at 3% in Q2, 4.4% in Q3, and an estimated 2.4% in Q4 when stripping out the government shutdown effect.
Inflation didn't spike the way many economists had feared either. According to data Sekera shared, CPI stayed in a range of 2.4% to 3.0% throughout the tariff period and came in at 2.4% in January.
On the flip side, Sekera flagged commodity hardware stocks as an area to watch out for, especially memory semiconductors. Micron landed a 1-star rating and looks concerning given that memory prices have surged but are likely to cool off once new supply comes online around mid-2027.
The bottom line from Morningstar is clear — don't overreact to short-term fears. Fundamentals and valuations still run the show, and right now, some high-quality names are available at prices that don't come around very often.
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Reference:
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Morning Star, 5 Oversold Stocks to Buy Before They Rebound. Accessed on February 24, 2026
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