Add These Core Stocks to Your Buy List in 2026

Key Concepts

• Core Stocks: High-quality companies with sustainable competitive advantages, predictable cash flows, adept management, and often, regular dividend payments.
• Economic Moat: A company’s ability to maintain competitive advantages over its rivals, protecting its long-term profits.
• Fair Value Estimate: Morningstar’s assessment of a stock’s intrinsic worth, based on its analysis of the company’s fundamentals.
• Compound Annual Growth Rate (CAGR): The mean annual growth rate of an investment over a specified period of time, assuming profits are reinvested during the term.

Core Stock Characteristics & Investment Strategy

According to Morningstar’s chief US market strategist, Dave Sakara, core stocks are foundational holdings in a portfolio characterized by several key attributes. These include possessing significant competitive advantages resulting in a wide economic moat rating from Morningstar. Crucially, these companies exhibit low to medium uncertainty regarding their future cash flows, making their financial performance relatively predictable. Effective management teams are also essential, frequently demonstrated by a commitment to returning capital to shareholders through regular dividend payments. Sakara advocates for purchasing shares when the stock price is at or below Morningstar’s fair value estimate.

Campbell Soup Company (CPB) – A Core Stock Recommendation

Campbell Soup Company is presented as a compelling core stock opportunity. The company has undergone a strategic transformation, diversifying its revenue streams. While its traditional soup business now represents only 25% of total sales, the snacks segment contributes a substantial 40%. This shift, coupled with supply chain efficiencies and increased investment in branding, positions Campbell for future growth.

Morningstar forecasts low single-digit annual sales growth and mid to high single-digit adjusted earnings per share growth over the next decade. The current stock yield is considered attractive, with projections for high single-digit dividend growth. Importantly, Morningstar believes Campbell’s stock is significantly undervalued, assigning a fair value estimate of $60 per share.

Guidewire Software (GWRE) – A Growth-Oriented Core Stock

Guidewire Software, while less recognizable than Campbell, is also identified as a core stock with strong potential. The company has established a wide economic moat through its cloud-based software solutions specifically designed for the property and casualty insurance industry.

Growth opportunities are anticipated from new client acquisitions, expansion of services within existing clients, and cross-selling of additional solutions. Morningstar projects a 5-year compound annual growth rate (CAGR) of 15% in revenue. Unlike Campbell, Guidewire currently does not pay a dividend, with management prioritizing reinvestment in the business, although a small buyback program has recently been initiated. The stock is deemed undervalued, with a fair value estimate of $210 per share.

Logical Connections & Synthesis

The presentation logically connects the definition of core stocks – companies with strong fundamentals and predictable growth – to specific examples. Both Campbell and Guidewire are presented as fitting this profile, albeit with different growth characteristics. Campbell offers a blend of value and income through its dividend, while Guidewire represents a higher-growth opportunity. The consistent application of Morningstar’s analytical framework – focusing on economic moats, fair value estimates, and growth projections – reinforces the credibility of the recommendations.

The key takeaway is that identifying and investing in core stocks, particularly when they trade below their intrinsic value, can be a sound long-term investment strategy. The examples of Campbell and Guidewire illustrate how this approach can be applied to different sectors and company types.