These buy-rated stocks are undervalued and can perform in the future, BMO says

BMO Capital Markets maintains a bullish stance on U.S. equities, advising investors to 'stay the course' and utilize market weakness as a buying opportunity, despite current valuation debates. The firm recommends focusing on S&P 500 stocks with an 'outperform' rating and a forward price-to-earnings multiple below 15. Examples include Pfizer, which is down over 5% year-to-date but yields nearly 7% with a 16% implied upside, and Constellation Brands, down 24% year-to-date yet projected for a 26% rally by analysts.

Analysis

BMO Capital Markets presents a bullish outlook on U.S. equities, advising clients to maintain their positions and leverage market downturns as buying opportunities, despite acknowledging that some valuation metrics are above historical averages. The firm's chief investment strategist, Brian Belski, mitigates valuation concerns by recommending a focus on value-oriented companies within the S&P 500, specifically screening for stocks with an 'outperform' rating and a forward price-to-earnings multiple below 15. The analysis highlights two such companies that have recently underperformed but are seen as having potential. Pfizer (PFE) is featured despite a more than 5% stock decline in 2025 and a potential FDA headwind concerning its COVID-19 vaccine; the investment thesis is supported by a nearly 7% dividend yield and an LSEG consensus price target implying a 16% upside. Similarly, Constellation Brands (STZ) is identified after a significant 24% share price drop, its worst since 2018, yet it carries a consensus 'buy' rating from analysts projecting approximately 26% upside.

Key Decisions for Investors

• Investors aligned with BMO's bullish macro view should consider using market pullbacks to increase exposure to value stocks, specifically targeting S&P 500 companies with forward P/E ratios under 15.
• Pfizer presents a high-yield, contrarian opportunity; its nearly 7% yield and projected 16% upside must be weighed against its multi-year share price decline and recent negative regulatory developments.
• Constellation Brands offers a potential recovery play based on a strong analyst consensus for a 26% rally, but its steep 24% year-to-date loss necessitates careful due diligence on the catalysts for the expected turnaround.