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 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—July 2024

The 10 most undervalued stocks from our Best Companies to Own list as of June 27, 2024, were:

1. Yum China YUMC
2. Estee Lauder EL
3. Polaris PII
4. Ambev ABEV
5. Zimmer Biomet ZBH
6. Roche Holding RHHBY
7. British American Tobacco BTI
8. Reckitt Benckiser Group RBGLY
9. Anheuser-Busch InBev BUD
10. Bristol-Myers Squibb BMY

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 June 27.

Yum China

• Price/Fair Value: 0.41
• Morningstar Uncertainty Rating: Medium
• Morningstar Capital Allocation Rating: Standard
• Industry: Restaurants

Yum China’s stock is 59% undervalued relative to our fair value estimate of $76 per share and stays at the top of our list of best stocks to buy again this month. Morningstar senior analyst Ivan Su believes the current market price overlooks two things: Yum China’s opportunities for restaurant expansion in China’s growing fast-food industry and margin improvement that will be realized by operating leverage and ongoing digital investments. Over the longer term, we believe there are several opportunities for Yum China to gain a share in the fragmented $700 billion Chinese restaurant market. Our conviction in rising fast-food penetration is underpinned by three long-term secular trends: longer working hours for urban consumers, rapidly rising disposable income, and ever-smaller family sizes. Coupled with strong brand recognition and an unrivaled supply chain, Yum China is set to be the prime beneficiary of growing Chinese fast-food spending.

Estee Lauder

• Price/Fair Value: 0.53
• Morningstar Uncertainty Rating: Medium
• Morningstar Capital Allocation Rating: Standard
• Industry: Household and Personal Products

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. We expect the company to benefit from a consumer shift in both developed and emerging markets toward higher-end beauty brands, explains Morningstar analyst Dan Su. However, we see risks on the horizon. Estee Lauder’s premium products are exposed to macro cyclicality as consumers tend to trade down or delay their higher-ticket discretionary spending amid recession concerns. In addition, Estee may need some time to refresh its lackluster cosmetics portfolio. Estee Lauder stock is trading 47% below our fair value estimate of $210 per share.

Polaris

• Price/fair value: 0.54
• Fair value uncertainty: Medium
• Capital Allocation Rating: Exemplary
• Industry: Recreational Vehicles

Polaris stock trades 46% below our fair value estimate of $145 per share. Polaris is one of the longest-operating brands in powersports. Around 70 years ago, the company started to build its reputation and brand by producing snowmobiles. In the decades since, the company has expanded into all-terrain vehicles, motorcycles, boats, and electric vehicles, building a recreational and utility vehicle powerhouse. We think Polaris stands to capitalize on its research and development, solid quality, operational excellence, and acquisition strategy, says Morningstar senior analyst Jaime Katz. However, peers are innovating more quickly than in the past, which could jeopardize the firm’s ability to take price and share consistently, particularly in periods of inflated recalls or aggressive industry discounting.

Ambev

• Price/Fair Value: 0.58
• Morningstar Uncertainty Rating: Medium
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Beverages—Brewers

Ambev stock trades 42% below our fair value estimate of $3.60 per share. Ambev is the largest brewer in Latin America and the Caribbean and is Anheuser-Busch InBev’s subsidiary in the region. It produces, distributes, and sells beer and PepsiCo products in Brazil and other Latin American countries and owns Argentina’s largest brewer, Quinsa. Brahma, the Brazilian brewer, was the first foray into the consumer product manufacturing industry by private equity group 3G. In 2000, 3G merged two Brazilian brewers, Brahma and Antarctica, creating Ambev. In part because of the favorable industry structures, and in part because of its 3G heritage, Ambev is a highly profitable business. “We estimate the company faced around BRL 3 billion in higher raw material costs in 2022,” says Morningstar director Ioannis Pontikis, “and a reversal of that by the end of 2024 would increase the gross margin by 3 percentage points, all else equal.” Pontikis also points to premiumization as a long-term growth and margin driver.

Zimmer Biomet

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

Zimmer Biomet is the undisputed king of large-joint reconstruction, says Morningstar senior analyst Debbie Wang, and we expect aging baby boomers and improving technology suitable for younger patients to fuel solid demand for large-joint replacement that should offset price declines. Zimmer has cultivated close relationships with orthopedic surgeons who make the brand choice. High switching costs and high-touch service lead to strong loyalty to the brand. Zimmer also aims to accelerate growth through innovative products and improved execution, which we view as critical. Zimmer Biomet stock trades 38% below our fair value estimate of $175 per share.

Roche Holding

• Price/Fair Value: 0.63
• Morningstar Uncertainty Rating: Low
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Drug Manufacturers—General

Roche is the first of two drug manufacturers to make the list of the best companies to invest in now. The company’s drug portfolio and industry-leading diagnostics provide significant competitive advantages and underpin our wide Morningstar 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. Though Roche is facing pressure owing to the weakness of the Swiss franc against other major currencies, we expect its biologics focus and innovative pipeline to allow the firm to continue to achieve growth as its competitors face competition. Roche stock trades 37% below our fair value estimate of $55 per share.

British American Tobacco

• Price/Fair Value: 0.65
• Morningstar Uncertainty Rating: Medium
• Morningstar Capital Allocation Rating: Standard
• Industry: Tobacco

British American Tobacco stock is trading 35% below our fair value estimate of $49 per share. 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 strategist Kristoffer Inton. We forecast tobacco volumes to decline about 4% annually through 2028, but we expect price increases and incremental revenue from next-generation products to offset the volume declines.

Reckitt Benckiser Group

• Price/Fair Value: 0.65
• Morningstar Uncertainty Rating: Medium
• Morningstar Capital Allocation Rating: Standard
• Industry: Household and Personal Products

Reckitt Benckiser’s portfolio includes a variety of household and consumer health brands, such as Lysol, Finish, Durex, and Mucinex. Reckitt is well positioned in categories that benefit from secular growth drivers across consumer health and hygiene, but changes in leadership and the slew of bad news in recent years have left Reckitt in a somewhat vulnerable position, and the company could benefit from more decisive portfolio interventions and the resolution of legal concerns, says Morningstar analyst Diana Radu. Still, Reckitt’s brands command premium prices in attractive categories across consumer health and home care. Reckitt Benckiser stock trades 35% below our fair value estimate of $17 per share.

Anheuser-Busch InBev

• Price/Fair Value: 0.66
• Morningstar Uncertainty Rating: Medium
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Beverages—Brewers

Anheuser-Busch InBev rejoins our list of best companies to buy now. The brewer has built a vast global scale and regional density through past acquisitions like Grupo Modelo and SABMiller. AB InBev’s strategy is to buy brands with a promising growth platform, expand distribution, and ruthlessly squeeze costs from the business, observes Morningstar’s Pontikis. “AB InBev has one of the strongest cost advantages in our consumer defensive coverage and is among the most efficient operators,” he adds. The brewer’s free cash flow conversion has been consistently higher than peers’ in recent years, but it needs to continue to deleverage its balance sheet to reduce its earnings volatility. AB InBev stock trades 34% below our fair value estimate of $90.

Bristol-Myers Squibb

• Price/Fair Value: 0.66
• Morningstar Uncertainty Rating: Medium
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Drug Manufacturers—General

Drugmaker Bristol-Myers Squibb rounds out our list of the best companies to buy now. Adept at partnerships and acquisitions, Bristol-Myers Squibb has built a strong portfolio of drugs and a robust pipeline. The firm has brought in partners to share the development costs and diversify the risks of clinical and regulatory failure. “We believe the cardiovascular partnership with Pfizer represents one of the most important partnerships,” says Morningstar director Damien Conover. Bristol is aggressively repositioning itself to expand through challenging patent losses, with an effort to focus on the high-margin specialty drug group. Bristol-Myers Squibb stock is trading 34% below our fair value estimate of $63 per share.

Find More of the Best Stocks to Invest In

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.