2023-11-08 01:40:49
The best companies have predictable cash flows and are run by management teams that have a history of making intelligent capital allocation decisions. (Photo: 123RF)
Regardless of what happens to interest rates and the economy, investors want to own stocks that provide some degree of certainty in terms of cash flow and fundamentals. We therefore believe that the best companies have predictable cash flows and are run by management teams that have a history of making intelligent capital allocation decisions.
But the best companies aren’t always the best stocks to buy. The price paid by an investor is also important. So, we present to you the 10 companies whose stocks are the most undervalued at the moment.
The 10 Best Stocks to Buy in November 2023
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)
Estee Lauder
Price/fair value ratio: 0.51
Morningstar Uncertainty Rating: Medium
Morningstar Capital Allocation Rating: Normal
Industry: Household and personal products
Estee Lauder stock is trading 49% below our fair value estimate and tops our list of best stocks to buy this month. Estee Lauder is a leading provider of premium beauty products that has a strong presence both in shopping malls and online. Given its brand value and cost advantage, we give the company a strong economic moat rating, says Morningstar analyst Dan Su. We expect the company to have a strong presence in developed and emerging markets, as consumers in these countries shift more towards more premium beauty brands. We think Estee Lauder stock is worth US$249.
Zimmer Biomet
Price/fair value ratio: 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 reconstructive orthopedic implants. We give the company a strong economic moat rating, in part because of the high switching costs that orthopedic surgeons would face if they switched to another company’s instrumentation, says Debbie Wang, principal analyst at Morningstar. We were surprised by the announcement of the CEO change earlier this year, but given the effectiveness of the current business strategy, we do not expect the new management to make radical changes, adds -She. We think Zimmer Biomet stock is worth US$175.
Next: Roche Holding, Anheuser-Busch InBev and US Bancorp
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