With stocks collapsing amid President Donald Trump’s trade war, it can be difficult for even long-term investors to take the plunge and hit “Buy.” That’s especially the case with the extreme levels of uncertainty about tariffs imposed across the globe.

But a focus on valuations and companies with strong competitive advantages can open opportunities for investors with a careful eye for risk. We’re highlighting four stocks that are trading below their fair value estimates assigned by Morningstar analysts and are assigned wide economic moats.

Here’s a closer look at what Morningstar’s analysts have said about each stock and the potential impact of tariffs.

International Flavors & Fragrances

Tariffs raise prices for the customers of ingredient producers, which is generally passed along to consumers. In response to higher prices, consumers could end up buying lower volumes or trading down to private-label products.

  • Lower volumes would likely have an impact on ingredients demand, but specialty ingredients are the most at risk if consumers trade down to private labels. That said, we don’t see a large impact on food and nonalcoholic beverages in general, reducing the impact on ingredient producers.

The bottom line: We maintain our $120 fair value estimate for wide-moat International Flavors & Fragrances.

  • At current prices, we view shares as undervalued, trading in 4-star territory. IFF sources its ingredients globally, presenting a lot of downside risk, but we estimate at least 70% of revenue is generated outside the United States, reducing the impact of tariffs.

Pfizer

The biopharma industry has been sheltered from tariffs for decades, including during the first Trump administration, but investors had been concerned about potential global tariffs, as the industry has significant manufacturing in European countries like Ireland, Germany, and Switzerland.

  • With roughly $200 billion in pharmaceutical imports in 2024, a 10% tariff could amount to a $20 billion headwind across the industry, with the biggest firms seeing potential annual tariffs as high as $1 billion.
  • Previously implemented tariffs on pharmaceutical imports from China (raised from 10% in February to 20% in March) appear manageable for branded biopharma, due to limited manufacturing in China, and pharmaceuticals are generally exempt from Mexico and Canada tariffs (25%, March 2025).

The bottom line: We think a future global pharmaceutical tariff is still a risk and could pressure gross margins and increase long-term tax rates. However, we expect firms to adapt their manufacturing, and nearly all large-cap biopharma firms continue to hold wide economic moats.

  • On margins, we could see near-term pressure from tariffs and long-term pressure from additional investment in US manufacturing facilities, which are not likely to receive approval for several years, even assuming US Food and Drug Administration inspections stay on track following staff reductions.
  • With increased US manufacturing, we expect tax rates could begin to rise closer to the current 21% US corporate tax rate, a level we assume will be maintained as Trump aims to extend his tax cuts via the reconciliation process in the Republican-controlled Congress.

Brown-Forman and Constellation Brands

We are maintaining our fair value estimates for the beverage firms we cover. While tariffs lasting an extended period will pressure sales and margins, we think it’s possible that they could be rescinded, as they tend to be used as a negotiating tactic. We see investment opportunities in Brown-Forman and Constellation Brands, which trade at respective 36% and 34% discounts to our $52 and $274 fair value estimates.

For US-based alcoholic names, we see Constellation, which generates 80% of its sales from Mexican beers, as remaining the most exposed to tariffs. While consumer products from Mexico are exempt in general, the US Commerce Department issued a separate notice on April 2 imposing a 25% import duty on canned beer, which makes up 39% of Constellation’s beer volume. We are not yet incorporating the tariffs into our base-case scenario, given the uncertainties, but our worst-case scenario suggests a high-teens impact on the bottom line if the tariff holds for the next four years.

Brown-Forman benefits from the exemption for tequila imports from Mexico (8% of sales). However, we expect that the 20% tariff on EU imports will likely bring retaliation from the trade bloc, which had threatened to impose a 50% tariff on US whiskeys. We don’t envision a disastrous outcome, though, given Brown-Forman’s low-teens sales exposure to the region.

For soft drink names, we see little direct tariff impact, given their localized supply chains. That said, we’d closely monitor cost inflation in packaging materials (notably aluminum) if the 54% tariff on Chinese products persists, as China accounts for 60% of the global aluminum supply. Energy drink makers Monster Beverage and Celsius are most exposed to aluminum cost hikes, as more than 90% of their volume is packaged in cans. However, we expect the firms to diversify sourcing and work with third-party co-packers to blunt the cost impact.

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