Every month Morningstar puts together a 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 they have 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 Oct. 30.
The November list includes three new stocks (see below). The three dropped from the list are Imperial Brands IMBBY, the world’s fourth largest tobacco company; RTX RTX, the aerospace and defense contractor; and banking giant Wells Fargo WFC.
The 3 newbies on the Top 10 list
Starting with the most undervalued as of Oct. 30,
1. Medtronic MDT, the medical-device company
Morningstar fair value estimate: $112. Monday price quote: $73.20.
“We remain confident in Medtronic’s wide economic moat, which is supported by intangible assets underpinning its various technology platforms,” wrote Morningstar analyst Debbie Wang.
“Looking forward, we’re eager to see how well the new leadless Micra AV2 and Micra VR2 pacemakers are received.”
2. Pfizer PFE, the health-care stalwart
Morningstar fair value estimate: $48. Monday price quote: $31.10.
“The market is underappreciating the tail potential of Pfizer’s covid sales and next-generation drugs,” wrote Morningstar analyst Damien Conover.
“We project Pfizer’s covid sales to normalize at close to $15 billion annually. ... Outside of covid, Pfizer’s core business is performing well, but we expect these sales to slow over the next few years.”
3. British American Tobacco BTI, the London tobacco giant, with brands including Kent
Morningstar fair value estimate: $47. Monday price quote: $31.
“Big Tobacco manufacturers are placing their bets on new categories most likely to win share of smokers,” such as e-cigarettes, wrote Morningstar analyst Philip Gorham. “British American Tobacco arguably has the most hedged position across emerging categories.”
The Seven Repeats
Starting with the most undervalued as of Oct. 30:
1. Estee Lauder EL, the cosmetics company
Morningstar fair value estimate: $200. Monday price quote: $112.55.
2. Zimmer Biomet ZBH, a medical-device producer
Morningstar fair value estimate: $175. Monday price quote: $108.35.
3. Roche Holding RHHBY, the Swiss drug company
Morningstar fair value estimate: $56. Monday price quote: $32.95.
4. Anheuser-Busch InBev BUD, the giant brewery
Morningstar fair value estimate: $90. Monday price quote: $58.85.
5. U.S. Bancorp USB, the country’s largest regional bank
Morningstar fair value estimate: $52. Monday price quote: $35.10.
6. Taiwan Semiconductor Manufacturing TSM
Morningstar fair value estimate: $139. Monday price quote: $92.05.
7. Yum China YUMC, China’s largest restaurant chain, including KFC
Morningstar fair value estimate: $80. Monday price quote: $44.95.
The author of this story owns shares of Medtronic, Pfizer and Anheuser-Busch.
