by With shares down 15% so far this year, now could be a good time to invest.
You might want to consider Morningstar’s list of the “Top 10 Companies to Invest in Now.” The investment research firm has a list of the 129 best stocks to invest in overall.
These stocks have “significant competitive advantages, and we believe those advantages are stable or growing,” wrote Susan Dziubinski, investment specialist at Morningstar.
“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.”
Morningstar picked the 10 most undervalued stocks, according to its fair value estimates, from the top 129. Here are the 10, in order of undervalued stocks as of Nov. 30, with the most undervalued first.
- Walt Disney (DIS) – Get a free report
- Comcast (CMCS extension) – Get a free report
- Taiwan semiconductor (TS extension) – Get a free report
- Guide wire software (GWRE extension) – Get a free report
- Equifax (efx extension) – Get a free report
- Transunion (REAL) – Get a free report
- Anheuser-Busch InBev (BUD) – Get a free report
- Yum China (YUM extension) – Get a free report
- Tyler Technologies (TIL) – Get a free report
- male (MAS) – Get a free report
disney: Morningstar analyst Neil Macker gives the company a wide moat (durable competitive advantage) and puts the fair value for the stock at $170. It recently traded at $99, indicating a 71% upside potential.
Commenting on Bob Iger’s reinstatement as CEO to replace Bob Chapek, Macker said, “Even with the changes, we expect Iger will continue to emphasize streaming’s central role at Disney.”
Additionally, “while Iger may not be as focused as Chapek on the parks side of the business, he’s generally been well liked by cast members and could help ease some of the relationship strain from the pandemic,” Macker said.
“Also, Iger has a much longer and stronger record with investors, which will likely help Disney and him through the transition period.”
Comcast: Morningstar analyst Michael Hodel gives the company a wide ditch and puts fair value for the stock at $60. It recently traded at $36, two-thirds below fair value.
“The expectations inherent in the company’s share price are extremely low,” he wrote in a commentary. “We do not expect a return to the mid-single-digit growth rates of the recent past.”
Additionally, “We believe investors should focus more on cash flow and capital allocation rather than small changes in broadband customer metrics,” Hodel said.
“Comcast generated approximately $3.40 per share of free cash flow over the past year, which it returned, and then some, to shareholders through repurchases and dividends.”
Looking at potential mergers, “management has indicated that at the current share price, the bar for acquisitions is high,” Hodel noted. “Given our $60 fair value estimate, we agree that aggressively repurchasing stock is a great way to increase shareholder value.”
Taiwan semiconductor: Morningstar analyst Phelix Lee gives the company a wide ditch and puts fair value for the stock at $133. That’s 62% higher than its recent trading at $82.
Taiwan Semi is the world’s largest dedicated contract chip manufacturer. Make ICs for customers based on their proprietary designs.
“The company has long benefited as semiconductor companies around the world have transitioned from integrated device makers to fabless [fabrication-less] designer,” Lee wrote in a comment.
He sees two long-term growth drivers for TSMC. “First, the consolidation of semiconductor companies is expected to create demand for embedded systems built with the most advanced nodes,” Lee said.
“Second, the organic growth of artificial intelligence, the Internet of Things and high-performance computing applications can last for decades.”
The author of this story owns shares in Comcast.
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