Over the last three months, the S&P 500 (SPX) index is down nearly 5%, reverting to early November level. After the initial optimism following President Trump’s inauguration, the gains evaporated as tariff-driven fears took hold.
However, the stock market is no stranger to rallies after such resets, always heading to a new all-time high.
Over the last 10 years, SPX yielded 10.66% annualized returns. Image credit: S&P Dow Jones Indices
At this point in time, investors should consider undervalued stocks with wide moats. Such companies have an enduring competitive advantage of at least 20 years. In turn, this protected market share safeguards their profitability for the long haul, despite intermittent market fluctuations.
1. Brown-Forman
Brown Forman (NYSE:BFb) has been making money for over 150 years by selling premium-grade alcohol brands such as Jack Daniel’s, Herradura, Chambord, Finlandia Vodka, Woodford Reserve, Korbel and others. Totaling just over 40 brands, they have become staples to nearly every restaurant and liquor store across the world.
Owing to its recognizable heritage and premium pricing, the company built a global distribution network, having partnered with local distributors to better leverage regional markets. Combined with marketing, Brown-Forman keeps their brands fresh with limited-edition releases.
For fiscal year 2024, the company generated $3.9 billion net sales at 30.6% operating margin. As of the latest earnings report for Q3 2025 delivered this Wednesday, Brown-Forman reaffirmed organic net sales growth between 2% and 4% for fiscal 2025, following cost-saving measures such as 12% workforce reduction announced last month.
Brown-Forman stock is also a dividend aristocrat, having increased dividend payouts for 41 consecutive years, while paying regular quarterly cash dividends for 81 years. At present, the dividend yield is 2% at $0.906 annual payout per share.
Although down 41% over a one-year period, BF.B shares are up 12.5% over the last month. Currently priced at $35.82, the average BF.B price target is $42.74 per share, according to WSJ forecasting data. The low estimate of $34 is close to the present price level, suggesting a sustained shift away from the bottom.
2. Berkshire Hathaway
It’s difficult to go wrong with this investing conglomerate, as it reflects Warren Buffett’s investment strategies. Over the last 25 years, the company had only four negative-performing years, with the largest drop suffered during the Great Recession of 2008 at -32.2% annual performance.
Last year, Berkshire Hathaway (NYSE:BRKb) ended with a solid 27.2% returns, which is very close to the best year of 2013 that yielded 29.8% gains to shareholders. Year-to-date, BRK.B stock is already up 9.75%.
Berkshire shareholders expose themselves to a diversified range of sectors, from insurance and consumer companies to Big Tech and banking. Exiting 2024, Berkshire holds a record $325 billion in cash reserves. Such an enormous war chest not only reassures shareholders but it also serves as a ramp for speculation.
After all, the company has ample means to seize emerging investment opportunities, often serving as the ‘lender of last resort’. And although not paying dividends itself, Berkshire has a large portfolio of such companies, including dividend aristocrats.
Presently priced at $494.51, the average BRK.B price target is $522.98 per share, with the low estimate being just over the current price level, at $495 per share.
3. American Express
Founded in 1850, this legacy credit and payments company is now priced at $282.42 per share, returning to early November level. Over the last year, American Express (NYSE:AXP) shareholders saw nearly 30% returns, while the stock declined 10% over the last month.
But with a 5-year total return of 162%, AXP ranks among the top 25% in the financial sector. Although overshadowed in terms of market share relative to Visa (NYSE:V) or Mastercard (NYSE:MA), American Express secured its wide moat by focusing on high-income clients.
With premium benefits, rewards and customer service, American Express has become the Aston Martin of credit card companies. As of latest Q4 2024 earnings ending December, American Express generated record $10.1 billion for the full year, with earnings per share (EPS) up to $14.01, an uptick of 25% from 2023.
For the full year 2025, the company expects 8-10% EPS gains, with a plan to increase the dividend payout by 17%. Presently, American Express gives 0.99% dividend yield at an annual payout of $2.80 per share.
Against the current price of $283.47, the average AXP price target is $324.46, while the low estimate is $265 per share. Although not at the very bottom, this is still a relatively safe exposure point for such a wide moat payments firm.
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Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
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