With the S&P 500 down 19% so far in 2022, you might see this as a buying opportunity.
But, of course, you’ll want to be a little cautious, as raging inflation, rising interest rates and a possible economic recession could push stocks further down.
However, Morningstar has created a list of 10 stocks to consider now, using its list of the 127 best stocks to own and filtering out the 10 most undervalued among them as of September 12.
The companies on the Best Stocks list “have significant competitive advantages, and we believe those advantages are stable or growing,” Susan Dziubinski, director of content for Morningstar.com, wrote in a commentary.
“We believe the best companies have predictable cash flows and are run by management teams that have a track record of making smart capital allocation decisions.”
Valuation rankings are determined by comparing the September 12 stock price to Morningstar analysts’ fair value estimates. Here is the list:
1. Taiwan Semiconductor Manufacturing (TSM) , a semiconductor manufacturer. Price/Fair Value: 0.49.
2. Anheuser-Busch InBev (BUD) , the brewer. Price/Fair Value: 0.57.
3. Yum China (YUMC) , owner of fast food restaurants in China, including KFC. Price/Fair Value: 0.58.
4. Comcast (CMCSA) , the media/telecommunications company. Price/Fair Value: 0.59.
5. GSK (GSK) , a pharmaceutical company based in the United Kingdom. Price/Fair Value: 0.60.
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6. Equifax (EFF) , a credit reporting agency. Price/Fair Value: 0.62.
7. Veeva Systems (VEEV) , a cloud solutions provider. Price/Fair Value: 0.66.
8. Zimmer Biomet (ZBH) , a medical device manufacturer. Price/Fair Value: 0.68.
9. Salesforce (CRM) , an enterprise software company. Price/Fair Value: 0.69.
10. Masco (MAS) , a maker a home improvement products. Price/Fair Value: 0.70.
Morningstar’s Take on Taiwan Semi
“We note two long-term growth drivers for TSMC,” Morningstar analyst Phelix Lee wrote in a note. “First, the recent consolidation of semiconductor companies is expected to create demand for integrated systems built with the most advanced nodes.”
For example, “Nvidia big client (NVDA) is acquiring Arm to consolidate intellectual property and strengthen its high-end offerings in data centers, artificial intelligence and the Internet of Things,” he said.
“Second, the organic growth of artificial intelligence, the Internet of Things, and high-performance computing applications can take decades.”
Morningstar’s view of Anheuser-Busch
“AB InBev has one of the strongest cost advantages in our consumer defensive coverage and is among the most efficient operators,” Morningstar analyst Philip Gorham wrote in a comment.
“Its massive global scale, along with its monopoly positions in Latin America and Africa give AB InBev significant fixed cost leverage and supply pricing power.”
As a result, the company enjoys “excessive returns on invested capital and best-in-class operating and cash flow cycles, turnover ratios and working capital management,” Gorham said.