4 Stocks to Buy Before the Bounce: Morningstar's September 21 Picks

Noise, Rates and the Real Signal

The September 21 Morning Filter is a Monday-before-open ritual: host Susan Jabinsky and chief US strategist Dave Sekera pack roughly 46 minutes with last week's rate move, eight earnings updates, a candid Tesla question from the audience, and four fresh stock ideas. The headline promises four stocks to buy before they bounce, but the tone is sober — filter the bounce through stars and moats, not hype.

The Fed lifted rates last week. The market had largely priced it, yet stocks slipped on the day, then staged a broad rebound on Thursday that held into Friday. Sekera's warning is blunt: most headlines around the chair's tone are short-term noise. The true constraint is the 10-year Treasury hovering around 5%. When the Fed cut 50 basis points in September 2024, the 10-year sat at 3.7% and there was room to ease; today that room is gone. Futures now imply above 50% odds of another hike in October and about 40% for December — a December hike was not even on the radar a month ago.

For a read on the consumer, he watches Costco and Darden. Costco is a great business but a rich stock — two stars, a 20% premium to fair value, about 43 times 2026 earnings sliding to 40 times 2027. Darden offers three income layers in one ticker: Olive Garden at 43% of sales serving middle-income value and trade-down, Longhorn at 25% as affordable indulgence in steak, and fine dining including Capital Grille and Ruth's Chris at 21% tied to asset-rich households. Across restaurants, valuations look stretched — Wingstop and Chipotle the rare exceptions — but Olive Garden still benefits from trade-down.

Housing provides the leverage play. LAR, a homebuilder flagged on August 24, keeps its $120 fair value despite missing top and bottom lines; the stock edged up on results before selling off the next day as the 10-year pushed back toward 5%. At a 36% discount it sits at four stars — waiting on lower rates to unlock, then quick to catch up. RH is sharper: $258 fair value, a 50% discount for five stars. Guidance moved up to 5.5%–7% sales and a 15%–16.2% EBITDA margin from 4.5%–8% and 14.2%–16%, broadly in line with Morningstar's model, yet housing overhang erased the beat.

Software and industrials show how sentiment whipsaws. Veeva Systems, at a $287 fair value, delivered 18% growth in both sales and earnings with multiple new wins. The narrative that software was finished because of AI had cut the stock to half of fair value in the spring, just as it had for many peers; it climbed to three stars by mid-2025 before falling again. CNH Industrial holds at $21 fair value. Margins are thin at 5%–5.5% and 2026 earnings at 41–46 cents look pricey near 31 times, but 2027 at $1.00 drops to just above 13 times. New and used inventories are normalizing, and corn moving from $4.10 to $5.30 a bushel, with wheat and soy firming, supports equipment demand.

Defense and consumer staples add nuance. Northrop Grumman had its fair value trimmed by $10 — only about 1.5% — after second-quarter sales rose 5% but a missile-program write-down pressured margin; programs like Sentinel and the B-21 are set to accelerate, leaving a 16% discount for four stars, medium uncertainty, wide moat and a long defense-spending tailwind. Hasbro keeps $100 fair value: a spring 2025 pick that surged more than 70% to $106 in February before pulling back. Scotts Miracle-Gro stays at $80; down more than 20% since July, the market fears contracting earnings — 2027 estimated near $4.9 versus about $4.35 in 2026 — yet at under 13 times 2027 and with a 5% yield, the case hinges on 2028 at $4.69 and margin normalization as commodity and shipping pressures fade.

Four Stocks Before the Bounce

The Tesla question was the most human moment. A viewer noted that Tesla was discussed last week without a single financial line. Sekera admitted he ran out of steam and notes. Going deeper, the stock is down 19% year to date. The analyst flagged three disappointments: the robotaxi rollout reaching only seven of nine promised cities, lofty expectations, and high uncertainty. Morningstar assigns a $450 fair value but, with very high uncertainty, only three stars — you have to believe the upside of that range.

Pick one is Procter & Gamble. Four stars on the edge of three, a slim 5% discount, a 3% yield, low uncertainty, wide moat built on cost advantages and intangible assets. The price has drifted back to mid-2020 levels after a long stretch as a two-star, too-rich name. The balance sheet is AA- with exemplary capital allocation, and the dividend has risen consistently, likely at inflation or a touch above. Forecasts are modest: inflation plus low single-digit volume and limited margin expansion — a core defensive hold that should lag least in a risk-off drawdown.

Pick two is Hershey. A 25% discount puts it at five stars, low uncertainty, wide moat, a 3.4% yield. In US chocolate it leads with 36% share versus Mars at 29%, the rest fragmented — a duopoly that helps manage pricing. Cocoa's astronomical surge from the second half of 2024 into early 2025 hit the name hard; it was five stars in early 2025, then ran to two stars by early 2026 before falling again. Chocolate is less exposed to GLP-1 headwinds than packaged food because it is an indulgence tied to holidays and gifting, and Hershey's gum and mints even benefit as flavor without calories. The model sees 3.8% five-year revenue growth, margins recovering toward history but still below 2024 in 2030, 12% earnings growth, trading at 20 times 2026 earnings sliding to 17.5 times 2027.

Pick three is Marvell Technology. Four stars, a 19% discount, high uncertainty, narrow moat on switching costs and intangible assets. The number-two share in networking chips, with a differentiated stack across the AI data-center chain — custom silicon, interconnect and switching. A new agreement with Google adds upside and includes a $12.2 billion warrant. Numbers are steep: fiscal 2026 revenue $8.2 billion up 42%, fiscal 2027 $12.2 billion up 49%, fiscal 2028 $18.5 billion up 52%, fiscal 2029 $29 billion up 58%. Earnings at $4.28 for fiscal 2027 sit near 50 times, falling below 30 times in fiscal 2028, with a five-year compound near 54% — a growth-at-a-reasonable-price set-up. The near catalyst is the October 6 investor day for 2030 targets and Google ramp detail.

Pick four is ASML Holding. Four stars, an 18% discount, high uncertainty, wide moat on cost advantages, switching costs and intangible assets. It builds the tools that build chips, especially the high-end EUV gear where AI demand still outpaces supply. After several buy calls in the first half of 2025, the stock rallied more than 170% by June 2026 into two stars before correcting. The forecast is 34% revenue growth this year and 28% in 2027, earnings at $37.12 for 2026 near 42 times falling to $51.67 in 2027 near 30 times, with a five-year compound near 27% — again, growth at a reasonable price if the 30 times 2027 holds.

The star system is a discount adjusted for uncertainty. Low-uncertainty names like P&G and Hershey can earn four or five stars on a modest discount; high-uncertainty tech needs a deeper discount to clear the same bar. Moat quality is the second filter — wide moats signal pricing power and sticky cash flow, narrow moats demand faster growth to justify the multiple. Yield acts as a bridge through the wait: 3% to 5% funds patience and reinvestment on dips.

The risk map is straightforward. LAR and RH stay pressured if the 10-year remains above 5%; they bounce only when rates ease. Marvell and ASML look cheap at 30 times next year's earnings only if AI capital spending keeps accelerating; any pause makes the multiple rich, and the Google warrant's dilution plus ASML's order cyclicality and export limits got little airtime. Hershey needs cocoa to stay contained for margins to recover; P&G needs volume to hold so inflation can be passed through without share loss.

Portfolio construction argues for roles, not single bets. P&G anchors with low beta, Hershey adds a value cycle on earnings recovery, Marvell and ASML add cyclical growth at a reasonable price. Volatility becomes a tool: scale in, average down, reinvest dividends. Running a separate scenario for each name beats relying on a single optimistic forecast.

What to watch is short: Marvell's October 6 targets and Google ramp, ASML's quarterly order book and High-NA EUV contracts, persistence of the 10-year above 5% for housing beta, and pre-October Fed volatility as an entry window. Sekera's frame endures — the Fed is a lagging indicator, the economy dictates; focus on moat and cash flow, not headlines.

The closing is simple: these four do not wait for the bounce, they position for the conditions that create it — dividend-backed patience in low uncertainty, growth at a reasonable price in high uncertainty. Note the list before Monday's open, queue the Thursday Broadcom deep dive, and open each Morningstar model to write your own assumptions. The noise is loud; value compounds quietly.