3 Value Stocks to Buy with $1,000 for the New Year

For the patient capital of a true investor, the starting point is clear: identify companies with durable advantages trading below their true worth. The checklist is straightforward. First, look for a wide economic moat-a sustainable competitive edge that protects profits over decades. Second, seek predictable cash flows, the lifeblood of compounding. Third, examine capital allocation history; the best managers reinvest profits wisely. Finally, the price must offer a margin of safety, a buffer against error or misfortune. This disciplined approach, focused on intrinsic value rather than quarterly noise, is the path to long-term wealth.

This year, the Morningstar Best Companies to Own list provides a curated starting point. These are firms that land on the value side of the Style Box and have earned a wide economic moat rating. They are managed by teams with a proven track record of capital allocation. The thesis is that these stocks are significantly undervalued today. As one guide to long-term investing notes, adopting a buy-and-hold perspective helps investors ignore market volatility and focus on a disciplined strategy. That is the mindset we bring to the following three names.

From this list, we highlight three stocks that meet the criteria for a quality value investment in 2026: Palo Alto Networks, Campbell's, and Bristol-Myers Squibb. Each represents a different sector but shares the core attributes of a wide moat and a current price that may not reflect its long-term potential. The task now is to examine each through the lens of intrinsic value and competitive durability.

Stock 1: Palo Alto Networks (PANW) – The Cybersecurity Moat

Palo Alto Networks operates in a fortress of its own making. The company's wide economic moat rating is built on two pillars: sticky products that customers find difficult to replace and a powerful network effect. This isn't a fleeting advantage; it's a durable competitive edge that protects profits over the long cycle. The moat is reinforced by its platform approach and land-and-expand model. Once a company adopts Palo Alto's security stack, the switching costs rise dramatically. The platform integrates network, cloud, and security operations, creating a single, holistic view that point solutions cannot match. This entrenchment drives retention and allows the company to upsell additional modules, increasing customer lifetime value.

The financial health of this moat is strong. The company is targeting a significant expansion in profitability, with a goal of achieving adjusted free cash flow margins of 40% or more by fiscal 2028. That's a powerful signal of operational discipline and the ability to convert growth into cash. Even amid a slowdown in sales growth, the focus on high-margin cash generation provides a robust buffer. This financial strength is critical as the company navigates a market shift toward consolidation. As customers seek to rationalize their tech stacks, they are increasingly looking for platform vendors like Palo Alto to replace a patchwork of point solutions. This trend is a direct tailwind for the company's strategy.

Valuation presents a classic value opportunity. The stock trades at a 17% discount to our $225 fair value estimate. For a leader with a wide moat and a clear path to higher cash flow margins, that gap represents a margin of safety. The current price does not fully reflect the compounding potential of its entrenched customer base or the secular tailwinds of vendor consolidation. The risk, as noted, includes execution on large acquisitions and the ever-present threat of disruption. Yet for an investor focused on intrinsic value and durable advantages, the setup is compelling. The stock's recent flat performance in 2025 may simply be the market overlooking the long-term durability of this cybersecurity fortress.

Stock 2: Campbell's (CPB) – The Snack Brand Transition

Campbell's is executing a deliberate and necessary transformation. The company's wide economic moat, as rated by Morningstar, is rooted in its portfolio of strong brands and entrenched relationships with retailers. This foundation provides stability, but the strategic shift away from its core soup business toward snacks is the key to unlocking higher growth and profitability. The goal is clear: redirect capital from legacy operations to build momentum in higher-margin categories where consumer demand is shifting.

This transition is being funded by aggressive supply chain efficiencies. By driving down costs across its manufacturing network, Campbell's is freeing up cash that can be reinvested. The company plans to boost spending behind its brands and capabilities, a move that directly targets the growth of its snack portfolio. This is a classic example of a management team using operational discipline to create the financial flexibility needed for strategic reinvention. The long-term forecast for the business is for low single-digit annual sales growth, which, while modest, reflects a more stable and profitable trajectory than the stagnant soup segment.

For a value investor, the setup hinges on execution. The moat is intact, but the company must successfully migrate its brand investment and consumer loyalty into the snack category. The supply chain savings provide a near-term buffer, but the real test is whether increased marketing and innovation can capture market share. The current valuation, implied by the "significantly undervalued" rating, appears to price in the risks of this transition without fully accounting for the potential for improved profitability.

. The stock offers a chance to buy a durable brand platform at a discount, betting that management can successfully navigate the shift.

Stock 3: Bristol-Myers Squibb (BMY) – The Pharmaceutical Engine

Bristol-Myers Squibb presents a classic value puzzle. On one side is a wide economic moat, supported by a strong portfolio of drugs and a robust pipeline. This foundation provides the durable competitive edge and predictable cash flows that value investors seek. On the other side is a looming patent cliff, with 47% of total revenue exposed to patent threats through 2028. The market's focus has often been on the erosion, but the intrinsic value story is about the company's ability to navigate and soften the blow.

Management's strategy is clear: leverage newer therapies and aggressive cost-cutting to offset the loss of patent exclusivity. The company is actively investing in its pipeline to bring forward faster-growing products, which should help maintain revenue momentum. Simultaneously, redoubled efforts to cut costs are designed to protect profitability during the transition. This dual-pronged approach aims to smooth the earnings trajectory, turning a potential cliff into a more gradual slope. For a value investor, the question is whether the market has already priced in too much pessimism about this execution.

The valuation suggests it has. The stock trades at a discount to a $66 per share intrinsic value estimate. That gap represents a margin of safety, but it is a narrow one given the patent risk. The setup is one of high uncertainty balanced against a potential for significant upside if the company successfully transitions its revenue base. The focus for long-term holders must be on capital allocation-the company's history of making smart decisions with shareholder returns is a critical part of the moat. If management can reinvest cash flow wisely into the pipeline and manage costs effectively, the intrinsic value could be realized. The risk is that the patent cliff hits harder than expected, or that the new products fail to gain traction. For now, the stock offers a chance to buy a wide-moat pharmaceutical engine at a discount, betting that its operational discipline will see it through the storm.

Allocating Your $1,000: A Disciplined Approach

With three compelling value names identified, the next step is to allocate your capital wisely. The framework is simple: focus on the business, not the noise. As the Morningstar Best Companies to Own list reminds us, the common thread is a wide economic moat and a current price that may not reflect long-term potential. This is the core holding approach. The first rule is to tune out macroeconomic distractions like interest rates. As one guide to value investing advises, trying to predict what the Fed will do... is a losing game. Instead, stay focused on the intrinsic value of the companies themselves.

The allocation should be guided by two factors: the width of the moat and the perceived margin of safety. The stock with the widest, most durable competitive advantage should receive the largest portion of your capital. This is the anchor of your portfolio, the holding you expect to compound for decades. For the other two picks, allocate based on your assessment of their individual margins of safety. A wider gap between the current price and your intrinsic value estimate justifies a larger position, all else being equal.

This principle aligns with Morningstar's advice on dividend stocks, which emphasizes choosing companies with durable dividends and buy those stocks when they're undervalued. While not all three picks are high-yield dividend stocks, the underlying philosophy applies: seek durable advantages and buy them at a discount. The goal is to build a portfolio of businesses you can hold for the long term, not trade for short-term gains.

Monitor for macroeconomic catalysts, but do not let them dictate your positions. Watch for trends in consumer spending that could affect Campbell's snack transition or interest rate movements that might impact Bristol-Myers Squibb's cost of capital. These are factors to consider, but they should not override your conviction in the business fundamentals. The bottom line is to allocate your $1,000 with discipline, putting the majority into the company with the most durable moat and the clearest path to value realization, and the remainder into the others based on your assessment of their individual safety margins.