The stock market has been on a tear recently, with the S&P 500 soaring 11% since Oct. 27.
That may give you pause about investing in stocks now. But if you do want to increase your equity holdings, you might consider Morningstar’s list of the 10 best stocks to buy now.
The list is filtered from Morningstar’s roster of the 131 best stocks to buy in general. These companies have strong fundamentals: competitive advantages, predictable cash flows and strong managements.
Morningstar assigns all the companies wide moats, meaning it sees them with competitive advantages that will last 20 years or more.
Morningstar culled the 10 most undervalued stocks among those 131 to create the top 10 list for right now. It measures undervaluation based on its fair-value estimates as of Nov. 28.
Here is the list, starting with the most undervalued stock as of that date.
Restaurants, Drugs and Cosmetics
1. Yum China (YUMC) -), China’s largest restaurant chain, which includes KFC
Morningstar fair value estimate: $80. Monday closing price: $42.05.
The company grew its individual restaurant total by 36% from 2019 to 2022, according to Morningstar.
“Now that China’s zero-covid policy is in the rearview mirror, we expect these new restaurants to not only deliver significant incremental revenue but also be accretive to margins,” wrote Morningstar analyst Ivan Su. “Over the next several years, we expect Yum China to speed up new unit openings.”
2. Roche Holding (RHHBY) -), a Swiss drug company
Morningstar fair value estimate: $56. Monday closing price: $35.43.
“We think Roche's drug portfolio and industry-leading diagnostics conspire to create maintainable competitive advantages,” wrote Morningstar analyst Karen Andersen.
“As the market leader in both biotech and diagnostics, this Swiss healthcare giant is in a unique position to guide global healthcare into a safer, more personalized, and more cost-effective endeavor.”
3. Pfizer (PFE) -), the pharmaceutical company
Morningstar fair value estimate: $47. Monday closing price: $29.30.
“Pfizer's foundation remains solid, based on strong cash flows generated from a basket of diverse drugs,” wrote Morningstar analyst Damien Conover. “The company's large size confers significant competitive advantages in developing new drugs.”
4. Estee Lauder (EL) -), the cosmetics company
Morningstar fair value estimate: $200. Monday closing price: $138.95.
5. Zimmer Biomet (ZBH) -), a medical equipment company
Morningstar fair value estimate: $175. Monday closing price: $116.90.
Tobacco, Food, Chemicals
6. Imperial Brands (IMBBY) -), a British tobacco company, the world’s fourth largest.
Morningstar fair value estimate: $36. Monday closing price: $24.15.
7. GSK (GSK) -), the British drug company
Morningstar fair value estimate: $54. Monday closing price: $36.65.
8. Campbell Soup (CPB) -), the soup company
Morningstar fair value estimate: $61. Monday closing price: $41.
9. Corteva (CTVA) -), an agricultural chemicals company
Morningstar fair value estimate: $67. Monday closing price: $45.20.
10. British American Tobacco (BTI) -)
Morningstar fair value estimate: $47. Monday closing price: $31.90.
