If you’re looking to add to your stock holdings, you might consider Morningstar’s list of the 10 “best stocks to buy now.”
Morningstar has a bigger list of 128 stocks that it calls the “best companies to own.” These are companies with both “significant competitive advantages" and advantages that "are stable or growing,” wrote Morningstar investment specialist Susan Dziubinski.
In addition, “the best companies have predictable cash flows and are run by management teams that have a history of making smart capital-allocation decisions,” she said.
Of the 128 companies on the best-to-own list, Morningstar chose the 10 most undervalued stocks to form its final roster. It measures valuations according its analysts’ fair-value estimates.
The List
Here are the top 10 in order of undervaluation as of Feb. 28.
Comcast (CMCSA), the media/telecom giant. Morningstar fair value estimate: $60, 61% above the March 3 close at $37.23.
Taiwan Semiconductor (TSM), the big chipmaker. Morningstar fair value estimate: $140, 56% above the close at $89.79.
Roche (RHHBY) , the big Swiss drug company. Morningstar fair value estimate: $57, 56% above the close at $36.50.
Walt Disney (DIS), the media/entertainment stalwart. Morningstar fair value estimate: $155, 53% above the close at $101.14.
Equifax (EFX), the credit-reporting provider. Morningstar fair value estimate: $315, 52% above the close at $207.52.
TransUnion (TRU), another credit-report provider . Morningstar fair value estimate: $99, 50% above the close at $65.99.
International Flavors & Fragrances (IFF), the world’s biggest specialty-ingredient maker. Morningstar fair value estimate: $140, 49% above the close at $93.78.
Anheuser-Busch InBev (BUD), the iconic beer maker. Morningstar fair value estimate: $90, 45% above the close at $62.08.
Tyler Technologies (TYL), a software provider for local governments. Morningstar fair value estimate: $475, 45% above the close at $327.
GSK (GSK), the British pharmaceutical giant. Morningstar fair value estimate: $50, 44% above the close at $34.66.
Disney: Morningstar analyst Neil Macker assigns the company a wide moat (durable competitive advantage).
“Disney reported a decent start to both fiscal 2023 and CEO Bob Iger’s second stint in office, as parks continued to post strong results, and streaming losses moderated” in the quarter ended Dec. 31, 2022, Macker wrote in a commentary.
“As expected, Iger announced a substantial cost-reduction plan with savings of $2.5 billion in non-content costs, including roughly 7,000 job cuts, and a $3 billion reduction in non-sports content spending.”
Further, “Iger will … return more creative and financial control to creative division heads,” Macker said.
Anheuser-Busch: Morningstar analyst Philip Gorham gives the company a wide moat.
“The impact of having to pass through extreme levels of inflation was evident in Anheuser-Busch’s 2022 results, as volume was slightly weaker than we had expected,” he wrote.
“However, the modest growth in gross profit confirms our thesis that AB InBev is roughly middle of the pack among the consumer product manufacturers in its ability to pass through pricing.”
Further, “the strong regional scale of the business, particularly in Latin America, makes this a high-quality company,” Gorham said. “Acquisitions have created a monster with vast global scale.”
The author of this story owns shares of Comcast and Disney.
