Investors have endured a lot of market uncertainty during the past year—and many market watchers expect volatility to persist for the foreseeable future.
During uncertain times, 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—117 in total—have significant competitive advantages, and we think those advantages are stable or growing. 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 firms aren’t always the best stocks to buy now. 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—June 2023
The 10 most undervalued stocks from our Best Companies to Own list as of May 30, were:
- International Flavors & Fragrances IFF
- U.S. Bancorp USB
- Anheuser-Busch InBev BUD
- GSK PLC GSK
- Comcast CMCSA
- Yum China YUMC
- Roche Holding RHHBY
- Wells Fargo WFC
- Zimmer Biomet ZBH
- Taiwan Semiconductor Manufacturing TSM
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 May 30.
International Flavors & Fragrances
- Price/Fair Value: 0.56
- Morningstar Uncertainty Rating: Medium
- Morningstar Moat Trend Rating: Stable
- Morningstar Capital Allocation Rating: Standard
- Industry: Specialty Chemicals
International Flavors & Fragrances tops this month’s list of the best stocks to buy now. The world’s largest specialty ingredients producer has struggled as cost inflation has weighed on profit growth, notes Morningstar strategist Seth Goldstein. The company has gotten off to a rough start in 2023 with weak near-term profits. But we expect this wide-moat company to grow profits at a high-single-digit rate from 2024-26 and view the shares as materially undervalued, says Goldstein. International Flavors & Fragrances stock trades 44% below our fair value estimate of $140.
U.S. Bancorp
- Price/Fair Value: 0.58
- Morningstar Uncertainty Rating: Medium
- Morningstar Moat Trend Rating: Stable
- Morningstar Capital Allocation Rating: Exemplary
- Industry: Banks—Regional
The first bank on this month’s best stocks to buy now list, U.S. Bancorp stock was pummeled as the regional banking crisis unfolded in March. But we think that the bank stock selloff went too far. In fact, U.S. Bancorp is one of the most profitable regional banks we cover, says Morningstar strategist Eric Compton. After U.S. Bancorp reported earnings, Compton noted that the bank’s deposit base and funding costs were tracking as we had expected. U.S. Bancorp stock trades 42% below our fair value estimate of $53 today.
Anheuser-Busch InBev
- Price/Fair Value: 0.61
- Morningstar Uncertainty Rating: Medium
- Morningstar Moat Trend Rating: Stable
- Morningstar Capital Allocation Rating: Exemplary
- Industry: Beverages—Brewers
Anheuser-Busch InBev stock returned to our list of the best stocks to buy last month, after negative publicity around the marketing of Bud Light in the U.S. Morningstar director Philip Gorham calls the negative sentiment around the stock “temporary noise.” The brewer put up a solid performance in the first quarter, as price increases kept gross margins stable and on track to meet full-year forecasts. The brewer has a vast global scale and regional density. The company has a history of buying brands with promising growth platforms and then expanding distribution while ruthlessly squeezing costs from the businesses, which contributes to its Morningstar Capital Allocation Rating of Exemplary. The stock trades 39% below our fair value estimate of $90.
GSK
- Price/Fair Value: 0.63
- Morningstar Uncertainty Rating: Medium
- Morningstar Moat Trend Rating: Stable
- Morningstar Capital Allocation Rating: Standard
- Industry: Drug Manufacturers—General
One of the largest pharmaceutical and vaccine companies, GSK’s innovative new product lineup and expansive list of patent-protected drugs earn a wide Morningstar Economic Moat Rating, says Morningstar director Damien Conover. Conover thinks the market remains overly concerned about Zantac litigation. We expect the litigation process to continue in 2023 and think the market is underestimating the firm’s growth potential. GSK stock trades 37% below our fair value estimate of $54 today.
Comcast
- Price/Fair Value: 0.65
- Morningstar Uncertainty Rating: Medium
- Morningstar Moat Trend Rating: Stable
- Morningstar Capital Allocation Rating: Standard
- Industry: Telecom Services
Growth in Comcast’s cable business has slowed, and we expect it to continue to slow as more customers access fiber and wireless network alternatives. We nevertheless think Comcast will be able to limit broadband share losses in the coming years while enjoying solid pricing power, says Morningstar director Mike Hodel. NBCUniversal is more challenged, however, though we do like the idea of expanding the theme park business around key content franchises, he adds. A solid balance sheet has allowed Comcast to aggressively repurchase shares and pay decent dividends. Comcast stock is a buy, trading 35% below our fair value estimate of $60 today.
Yum China
- Price/Fair Value: 0.67
- Morningstar Uncertainty Rating: Medium
- Morningstar Moat Trend Rating: Stable
- Morningstar Capital Allocation Rating: Standard
- Industry: Restaurants
Yum China stock is 33% undervalued relative to our fair value estimate of $84. Morningstar senior analyst Ivan Su argues that there’s reason to be confident about restaurants 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 posted record revenue and profits in the first quarter, as China moved away from a zero-COVID-19 policy.
Roche Holding
- Price/Fair Value: 0.70
- Morningstar Uncertainty Rating: Low
- Morningstar Moat Trend Rating: Stable
- Morningstar Capital Allocation Rating: Exemplary
- Industry: Drug Manufacturers—General
The second drugmaker on this month’s best stocks to buy now list, Roche stock trades 30% below our fair value estimate of $57. 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 blockbusters face competition. We maintained our fair value estimate after Roche reported earnings.
Wells Fargo
- Price/Fair Value: 0.71
- Morningstar Uncertainty Rating: Medium
- Morningstar Moat Trend Rating: Stable
- Morningstar Capital Allocation Rating: Standard
- Industry: Banks—Diversified
Like the other banks, Wells Fargo has taken it on the chin as the banking crisis has unfolded. But Wells isn’t a regional bank; in fact, it remains one of the top deposit gatherers in the U.S. behind JPMorgan Chase JPM and Bank of America BAC. The bank beat first-quarter estimates, and deposits slipped modestly. However, the bank is in the midst of a multiyear rebuild, with years of expense-saving-related projects ahead and additional investment in its existing franchises, says Morningstar strategist Eric Compton. The bank also has a sizable presence in the middle-market commercial space and boasts a large advisor network, which support its wide economic moat rating. Wells Fargo stock trades 29% below our fair value estimate of $58.
Zimmer Biomet
- Price/Fair Value: 0.72
- Morningstar Uncertainty Rating: Medium
- Morningstar Moat Trend Rating: Stable
- Morningstar Capital Allocation Rating: Exemplary
- Industry: Medical Devices
Zimmer Biomet rounds out our list of the best stocks to buy now, trading 28% below our fair value estimate. Zimmer manufactures orthopedic reconstructive implants. We award the company a wide economic 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. A strong first quarter bodes well for the remainder of 2023, she adds. We think Zimmer Biomet stock is worth $175 per share.
Taiwan Semiconductor Manufacturing
- Price/Fair Value: 0.73
- Morningstar Uncertainty Rating: Medium
- Morningstar Moat Trend Rating: Stable
- Morningstar Capital Allocation Rating: Exemplary
- Industry: Semiconductors
The stock of the world’s largest dedicated contract chip manufacturer rounds out our list of the best stocks to buy this month. We believe Taiwan Semiconductor will be a significant beneficiary in high-performance computing, with additional upside potential from generative artificial intelligence, says Morningstar analyst Phelix Lee. We see limited downside in the stock’s price, as inventory correction has already been priced in, he adds. Taiwan Semiconductor’s stock trades 27% below our fair value estimate of $139.
The Best Stocks to Invest In Now
You can review all of the companies on our Best Companies to Own list and dig into our methodology, which includes definitions for the key Morningstar metrics included in this article. Those with specific interests can drill down with our Best International Companies to Own, Best Sustainable Companies to Own, and Best Innovative Companies to Own lists, too. And as we outline here, we suggest that you focus your research on the undervalued stocks of the companies on these lists.
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The author or authors do not own shares in any securities mentioned in this article.Find out about Morningstar’s editorial policies.
