If you’re trying to figure out which stocks to buy right now, this may be helpful for you.
Morningstar has created a list of what it calls the top 10 high-conviction stock purchases by its “ultimate stock pickers” in the fourth quarter.
The pickers include 22 money managers who oversee mutual funds covered by Morningstar analysts and four who run the investment portfolios of large insurance companies. A total of 24 have reported their fourth-quarter holdings so far.
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“We think of high-conviction purchases as occasions when managers have made meaningful additions to their portfolios, as defined by the size of the purchase in relation to the portfolio’s size,” Morningstar said.
All 10 stocks on the roster are assigned either a narrow or wide moat (durable competitive advantage) by Morningstar analysts.
Here’s the list in order of the number of funds that bought the stock in a high-conviction manner.
- Amazon (AMZN), the online retailer/cloud giant. Five funds
- Alphabet (GOOGL), the internet-search and advertising titan. Five funds
- CarMax (KMX), the auto retailer. Four funds
- Equifax (EFX), the credit reporting firm. Four funds
- Linde LIN, the world’s largest industrial gas supplier. Four funds
- Texas Instruments (TXN), the semiconductor stalwart. Four funds
- United Parcel Service (UPS), the delivery company. Four funds
- Charles Schwab (SCHW), the securities brokerage. Four funds
- Pfizer (PFE), the big pharmaceutical company. Four funds
- Mastercard (MA), the credit card company. Four funds
Amazon: Morningstar analyst Dan Romanoff gives the company a wide moat and puts fair value for the stock at $137. It recently traded at $95.50, giving it 43% upside to fair value.
“Wide-moat Amazon reported solid fourth-quarter results but provided a first-quarter outlook that was shy of our expectations,” he wrote in a commentary.
“E-commerce was generally solid, while Amazon Web Services [AWS--the cloud division] continues to decelerate, including through January.”
Overall, “we see real progress being made on the operational side, which was masked by impairment charges,” Romanoff said.
“We still foresee healthy long-term growth driven by e-commerce proliferation, AWS, and advertising. But the near term remains a work in progress with macro issues weighing on 2023.”
Linde: Morningstar analyst Krzysztof Smalec gives the company a narrow moat and puts fair value for the stock at $359, 8.6% above recently trades at $330.50.
He was impressed with Linde’s fourth-quarter earnings, which helped lead him to raise his fair value estimate from $347. “We are pleased with Linde’s continued strong margin expansion,” he wrote in a commentary.
Further, “we remain bullish on the long-term outlook for Linde,” Smalec said. “The industrial gas firm announced a $1.8 billion investment in a blue ammonia project in the Gulf Coast, expected to come on stream in 2025.”
Also, “Linde is poised to capitalize on an acceleration in clean energy opportunities, driven by the Inflation Reduction Act,” he said.
The author of this story owns shares of Amazon, Alphabet, UPS, Pfizer and Mastercard
