2 Cheap Growth Stocks to Buy

Hi. I’m Susan Dziubinski with Morningstar. As we close out October and head into November, large-cap growth stocks are maintaining their performance lead in 2023. And the lead is pretty big: The Morningstar US Large Growth Index is outperforming the broad-based Morningstar US Market Index by 15 full percentage points this year as of this taping.

Of course, whether large-growth stocks will continue to dominate is anyone’s guess. But Morningstar expects the U.S. economic growth rate to slow during the next few quarters. What that might mean for growth stocks isn’t cut and dried. But we think investors looking to buy growth stocks today would do well to focus on two things.

Thing 1: Finding growth companies that should be able to maintain margins in a slower growth environment.

Thing 2: Buying the stocks of these companies with a decent margin of safety and thereby limiting price risk.

So today, we’re looking at two cheap large-cap growth stocks to buy taken from Morningstar’s Best Companies to Own list. Our Best Companies to Own list includes companies with significant competitive advantages—or what we call wide economic moats. These companies also have predictable cash flows and are well positioned to confront an economic slowdown. The stocks we’re focusing on today are both undervalued according to Morningstar’s metrics and land in the large-growth portion of the Morningstar Style Box.

2 Cheap Growth Stocks to Buy

1. ASML Holding ASML
2. AstraZeneca AZN

Our first cheap large growth stock to buy is ASML Holding ASML. ASML is the market share leader in photolithography systems used in the manufacturing of semiconductors. ASML continues to enjoy strong growth in 2023 despite a soft chip market, in large part due to demand out of China. Morningstar expects this demand to moderate going forward, both organically and due to recently updated U.S. export restrictions. But we nevertheless believe ASML will make up for it with demand in other geographies. We think shares are worth $750 each.

Our second cheap large growth stock to buy is AstraZeneca AZN. The firm sells branded drugs across several major therapeutic classes. Morningstar thinks Astra’s pipeline is one of the strongest in the drug group, and we think the company is developing several key products that hold blockbuster potential. We think the company’s launched cancer drugs are well positioned as treatments of hard-to-treat cancers. These drugs also carry strong pricing power to support higher margin sales. Astra is well-positioned in the respiratory and diabetes spaces, too, but here, the firm has less pricing power. We think shares are worth $78 each.

For more stock ideas, be sure to subscribe to Morningstar’s channel and visit Morningstar.com.

Morningstar director Damien Conover and analyst William Kerwin provided the research behind this segment.

Watch “2 Dividend Aristocrats to Buy Before 2024″ for more from Susan Dziubinski.