The 10 Best Companies to Invest in Now

Investors have endured a lot of stock market volatility during the past few years. Given ongoing uncertainty about interest rates and the economy, investors may be wondering which stocks to buy now against this backdrop.

Regardless of where interest rates and the economy are headed, investors may want to own companies that offer some sense of certainty in terms of cash flows and company fundamentals. That’s where Morningstar’s Best Companies to Own list comes in. The companies that make up this list—131 in total—have significant competitive advantages. We believe the best companies have predictable cash flows and are run by management teams that have a history of making smart capital-allocation decisions.

But the best companies aren’t always the best stocks to buy. How much an investor pays to own a company—best or otherwise—is important, too. So, here we’re focusing on the 10 best companies with the most undervalued stock prices today.

10 Best Stocks to Buy Now—November 2023

The 10 most undervalued stocks from our Best Companies to Own list as of Oct. 30, 2023, were:

1. Estee Lauder EL
2. Zimmer Biomet ZBH
3. Roche Holding RHHBY
4. Anheuser-Busch InBev BUD
5. U.S. Bancorp USB
6. Taiwan Semiconductor Manufacturing TSM
7. Medtronic MDT
8. Yum China YUMC
9. British American Tobacco BTI
10. Pfizer PFE
    
    

Here’s a little bit about why we like each of these companies at these prices, along with some key Morningstar metrics. All data is as of market close on Oct. 30, 2023.

Estee Lauder

• Price/Fair Value: 0.51
• Morningstar Uncertainty Rating: Medium
• Morningstar Capital Allocation Rating: Standard
• Industry: Household & Personal Products
  
  

Estee Lauder stock is trading 49% below our fair value estimate and tops our list of best stocks to buy this month. With brands that include its namesake, Clinique, and Aveda, Estee Lauder is a leading provider of premium beauty products that has a strong presence across both brick-and-mortar and digital channels. Given its brand equity and cost advantages, we assign the company a wide Morningstar Economic Moat Rating, explains Morningstar analyst Dan Su. We expect the company to benefit from a consumer shift in both developed and emerging markets toward higher-end beauty brands. We think Estee Lauder stock is worth US$249 per share.

Zimmer Biomet

• Price/Fair Value: 0.59
• Morningstar Uncertainty Rating: Medium
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Medical Devices
  
  

Zimmer Biomet stock is trading 41% below our fair value estimate. Zimmer manufactures orthopedic reconstructive implants. We award the company a wide moat rating thanks in part to the high switching costs that orthopedic surgeons would face if they transitioned to another company’s instrumentation, says Morningstar senior analyst Debbie Wang. We were surprised by the CEO change announcement earlier this year, but considering how well the current business strategy is working, we don’t expect new management will bring wholesale changes, she adds. We think Zimmer Biomet stock is worth US$175 per share.

Roche Holding

• Price/Fair Value: 0.60
• Morningstar Uncertainty Rating: Low
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Drug Manufacturers—General
  
  

Roche stock trades 40% below our fair value estimate of US$56. The company’s drug portfolio and industry-leading diagnostics provide significant competitive advantages and underpin our wide economic moat rating, says Morningstar strategist Karen Andersen. “This Swiss healthcare giant is in a unique position to guide healthcare into a safer, more personalized, and more cost-effective endeavor,” she notes. With its biologics focus and innovative pipeline, we expect Roche to continue to achieve growth as its competitors face headwinds.

Anheuser-Busch InBev

• Price/Fair Value: 0.60
• Morningstar Uncertainty Rating: Medium
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Beverages—Brewers
  
  

Anheuser-Busch InBev has built a vast global scale and regional density through past acquisitions like Grupo Modelo and SABMiller. AB InBev has a history of buying brands with promising growth platforms and then expanding distribution while squeezing costs from the businesses, which contributes to its Morningstar Capital Allocation Rating of Exemplary. The brewer’s second-quarter performance in the United States was disastrous: The boycott around the marketing of Bud Light in the U.S. led to a loss in market share. Management noted, however, that Bud Light’s market share hasn’t worsened since April, reports Morningstar director Philip Gorham. We think there’s plenty of upside with the stock for patient investors. AB InBev stock trades 40% below our fair value estimate of US$90.

U.S. Bancorp

• Price/Fair Value: 0.60
• Morningstar Uncertainty Rating: Medium
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Banks—Regional
  
  

U.S. Bancorp stock trades 40% below our fair value estimate of US$52. U.S. Bancorp stands out as one of the most profitable regional banks we cover, says Morningstar equity strategist Eric Compton. While some of its domestic competitors have started to catch up, few can match the U.S. Bancorp’s operating efficiency. The bank offers a solid mix of banking and nonbanking services and continues to expand its presence through new acquisitions and partnerships. Any uncertainty we have toward U.S. Bancorp comes from the macroeconomic backdrop of interest-rate, credit, and debit cycles, but the bank has a proven track record of making sound capital-allocation decisions.

Taiwan Semiconductor Manufacturing

• Price/Fair Value: 0.62
• Morningstar Uncertainty Rating: Medium
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Semiconductors
  
  

We believe Taiwan Semiconductor, the world’s largest dedicated contract chip manufacturer, will be a significant beneficiary in high-performance computing, including generative artificial intelligence. Following upbeat fourth-quarter guidance from company management, we raised our fair value estimate to US$139 per share from US$137. We now expect the chip manufacturer to brace for a weak economy and focus on addressing bottlenecks for AI applications, thus giving it more room to increase dividends, notes Morningstar analyst Phelix Lee. Taiwan Semiconductor stock trades 38% below our fair value estimate.

Medtronic

• Price/fair value: 0.62
• Fair value uncertainty: Medium
• Capital Allocation Rating: Standard
• Industry: Medical Devices
  
  

Medtronic stock looks undervalued to us, trading 38% below our fair value estimate. One of the largest medical-device companies, Medtronic maintains a diversified product portfolio targeting a wide range of chronic diseases. With its expansive selection of products for acute care in hospitals, Medtronic is a key partner for its hospital customers, says Morningstar’s Wang. We think Medtronic stock is worth US$112 per share.

Yum China

• Price/Fair Value: 0.63
• Morningstar Uncertainty Rating: Medium
• Morningstar Capital Allocation Rating: Standard
• Industry: Restaurants
  
  

Yum China’s stock is 37% undervalued relative to our fair value estimate of US$84. Morningstar senior analyst Ivan Su argues that there’s reason to be confident about restaurant companies such as Yum China (whose brands include KFC, Pizza Hut, and Taco Bell, among others) that have the scale to be aggressive on pricing; that provide customers greater access via robust digital ordering, delivery, and drive-through options; and that boast healthy balance sheets. Yum China’s 2023 investor day offered upbeat medium-term financial targets and reinforced our wide moat rating and positive long-term thesis.

British American Tobacco

• Price/Fair Value: 0.63
• Morningstar Uncertainty Rating: Medium
• Morningstar Capital Allocation Rating: Standard
• Industry: Tobacco
  
  

British American Tobacco stock is trading 37% below our fair value estimate of US$47. While cigarettes will likely remain the driving force of profits in the industry for the next decade, British American Tobacco has been the most aggressive of the Big Tobacco makers with its push into new-generation products, with exposure to several emerging categories, including vaping, heated tobacco, and oral products, says Morningstar’s Gorham.

Pfizer

• Price/Fair Value: 0.64
• Morningstar Uncertainty Rating: Medium
• Morningstar Capital Allocation Rating: Standard
• Industry: Drug Manufacturers—General
  
  

New to the list of best companies to invest in now is drug manufacturer Pfizer, which is currently trading at a 36% discount to its fair value estimate of US$48. The company’s large size gives it significant competitive advantages in developing new drugs, and its diverse portfolio of drugs helps insulate the company from any one particular patent loss, says Morningstar sector director Damien Conover. While the company gave reduced guidance for COVID-19 product sales, it also announced cost-cutting plans that show the drug manufacturer’s ability to adapt to demand while supporting strong margins.