With the end of the year upon us, financial market experts are offering a raft of recommendations for 2024.
Morningstar has put together a list of more than 100 of the best companies to own. The firm assigns all these companies a wide moat, meaning it sees them having competitive advantages for at least 20 years.
The companies also have “predictable” cash flows and managements that make smart decisions about how they manage and invest their money.
To be sure, “we aren’t advocating that you buy shares of every company on this list today,” Morningstar says. “Even the greatest company can be a bad investment if you overpay.” And some of the companies on the list trade above Morningstar’s fair value estimates.
“Still, we believe these companies are essential for any stock investor’s watchlist.” The roster includes (alphabetically):
Apple (AAPL) -)
Morningstar fair value estimate: $160. Wednesday closing price: $197.95.
“We believe Apple has cemented a long-term position atop the consumer electronics industry with a focus on a premium ecosystem of tightly integrated hardware, software, and services,” wrote Morningstar analyst William Karwin. That includes the iPhone as the system’s “lynchpin.”
But, “we think the stock has outpaced the firm’s fundamentals. We recommend investors wait for a pullback before investing,” he said.
Berkshire Hathaway (BRK.B) -)
Morningstar fair value estimate: $400. Wednesday closing price: $362.
“Berkshire, owing to its diversification and its lower overall risk profile, offers one of the better risk-adjusted return profiles in the financial-services sector,” wrote Morningstar analyst Greggory Warren.
“We remain impressed by Berkshire's ability in most years to generate high-single- to double-digit growth in book value per share, comfortably above our estimate of its cost of capital.”
Caterpillar (CAT) -)
Morningstar fair value estimate: $229. Wednesday closing price: $268.
“We believe Caterpillar will continue to be the leader in the global heavy machinery market, providing customers an extensive product portfolio consisting of construction, mining, energy, and transportation products,” wrote Morningstar analyst Dawit Woldemariam.
“Caterpillar’s strong brand is underpinned by its high-quality, extremely reliable, and efficient products. Customers also value Caterpillar’s ability to lower the total cost of ownership.”
Retail, Industrial, Finance
Costco (COST) -)
Morningstar fair value estimate: $460. Wednesday closing price: $642.
Honeywell (HON) -)
Morningstar fair value estimate: $229. Wednesday closing price: $203.10.
Mastercard (MA) -)
Morningstar fair value estimate: $421. Wednesday closing price: $424.70
McCormick (MKC) -)
Morningstar fair value estimate: $64. Wednesday closing price: $69.75.
Merck (MRK) -)
Morningstar fair value estimate: $103. Wednesday closing price: $107.05.
Microsoft (MSFT) -)
Morningstar fair value estimate: $370. Wednesday closing price: $374.35.
Thermo Fisher Scientific (TMO) -)
Morningstar fair value estimate: $600. Wednesday closing price: $518.35.
The author owns shares of Apple, Berkshire Hathaway, Honeywell, Mastercard and Microsoft.
