Are you looking to increase your allocation to stocks, despite the market’s recent volatility?
If so, you might consider this stock list from Morningstar. It starts with a roster of 128 “Best Companies to Own.” These are stocks that “offer some sense of certainty in terms of cash flows and company fundamentals,” writes Morningstar investment specialist Susan Dziubinski.
“The companies that make up this list have significant competitive advantages [moats], and we think those advantages are stable or growing.”
Further, “we believe the best companies … are run by management teams that have a history of making smart capital-allocation decisions,” she said.
Of the Best to Own list, Morningstar chose the 10 companies that were most undervalued, as of Jan. 31, compared to its analysts’ fair value estimates. Here’s that roster, starting with the company most undervalued as of Jan. 31.
- Tyler Technologies (TYL), a software solutions provider for local governments
- Comcast (CMCSA), the telecommunications/media colossus
- Taiwan Semiconductor Manufacturing (TSM), the giant semiconductor maker
- Anheuser-Busch InBev (BUD), the huge beer company
- Roche Holding (RHHBY) , the pharmaceutical heavyweight
- Walt Disney (DIS), the entertainment titan
- GSK (GSK), the pharmaceutical stalwart
- Equifax (EFX), the credit reporting agency
- Masco (MAS), a maker of home improvement products
- TransUnion (TRU), the credit reporting agency
Tyler: Morningstar analyst Dan Romanoff assigns the company a wide moat and puts fair value for the stock at $500. It recently traded at $347.
“Tyler reported solid third-quarter results, including upside to our model on revenue and non-GAAP [generally accepted accounting principles] operating margin,” he wrote in a commentary.
“The demand environment remains healthy, and momentum continues with solid normalized bookings, software subscriptions, and transactional revenue.”
Further, “we see the acquisition of Rapid Financial [a payments company] as expanding the market opportunity for Tyler’s payments business,” Romanoff said.
Comcast: Morningstar analyst Michael Hodel gives the company a wide moat and puts fair value for the stock at $60. It recently traded at $41.
“Comcast’s fourth-quarter results won’t change the negative narrative around the firm,” he wrote in a commentary. “But we like the effort to expand the theme park business to build around key content franchises.”
Moreover “Comcast’s solid balance sheet has allowed it to aggressively repurchase shares, spending $13 billion to reduce shares outstanding about 7% during 2022,” he said. At the same time, it paid almost $5 billion in dividends.
Taiwan Semi: Morningstar analyst Phelix Lee assigns the company a wide moat and puts fair value for the stock at $140. It recently traded at $97.
“TSMC’s expansion plans around the globe bolster our confidence in the company’s long-term outlook,” he said “That’s not only in high performance computing, but also in automotive.”
Further, “the company’s conservative capital spending budget and recent weak operational data in the supply chain suggest TSMC’s share price may have bottomed,” he said. More positive economic data from China might boost market sentiment for TSMC.
