The stock market has been unpredictable in the last year, with a bear market in the summer of 2022 and a rally in early 2023. As the market continues to be volatile, investors are turning to high-quality stocks with strong fundamentals for a safe bet. Morningstar analysts have compiled a list of their top 10 undervalued stock picks that are trading as much as 35% below fair market value.

Mark Haefele, the chief investment officer at UBS Global Wealth Management, believes that the current optimism in the market is overblown. He pointed to a looming recession, the possibility of sticky inflation on the way down, and the pain from higher interest rates hitting consumers harder than expected. Dan Suzuki, deputy chief investment officer at Richard Bernstein Advisors, echoed this sentiment, noting that we are just entering a profits recession both in the US and globally, and liquidity is set to tighten even further in 2023.

Given the increased uncertainty ahead, investors are focusing on defense. This means investing in companies with robust balance sheets, a healthy cash flow, a competitive advantage over their peers, and management teams with a good track record.

The 10 stocks chosen by Morningstar analysts have a competitive advantage that will either remain stable or is expected to grow. They are trading anywhere between 27% to 35% below Morningstar’s fair value estimate. The list includes stocks from a variety of industries, such as retail, energy, healthcare, and technology.

It’s important to remember that the stock market is unpredictable, and no one can predict the future. However, investing in high-quality stocks with strong fundamentals can help protect your portfolio from the volatility of the market. The 10 stocks chosen by Morningstar analysts provide a great starting point for investors looking for a safe bet in the stock market.