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—April 2024

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

1. Yum China YUMC
2. Roche Holding RHHBY
3. British American Tobacco BTI
4. Imperial Brands IMBBY
5. Reckitt Benckiser Group RBGLY
6. Pfizer PFE
7. Anheuser-Busch InBev BUD
8. Polaris PII
9. Ambev ABEV
10. Estee Lauder EL

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 March 27.

Yum China

• Price/Fair Value: 0.49
• Morningstar Uncertainty Rating: Medium
• Morningstar Capital Allocation Rating: Standard
• Industry: Restaurants

Yum China’s stock is 51% undervalued relative to our fair value estimate of $80 per share and stays at the top of our list of best stocks to buy 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 USD 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.

Roche Holding

• Price/Fair Value: 0.57
• 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 the firm’s biologics focus and innovative pipeline to allow Roche to continue to achieve growth as its competitors face competition. Roche stock trades 43% below our fair value estimate of $55 per share.

British American Tobacco

• Price/Fair Value: 0.62
• Morningstar Uncertainty Rating: Medium
• Morningstar Capital Allocation Rating: Standard
• Industry: Tobacco

British American Tobacco stock is trading 38% below our fair value estimate of $49 per share. Though we think British American Tobacco stock is materially undervalued, Morningstar strategist Philip Gorham argues that the company needs to sharpen its operational focus to accelerate internal cash flow generation and implement a clear capital allocation strategy, whether to return capital to shareholders or to scale its investments in some of the emerging nicotine categories. 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 tobacco.

Imperial Brands

• Price/Fair Value: 0.63
• Morningstar Uncertainty Rating: Medium
• Morningstar Capital Allocation Rating: Standard
• Industry: Tobacco

The second Big Tobacco company on our list of the best companies to buy now, Imperial Brands stock trades 37% below our fair value estimate of $36 per share. Morningstar’s Gorham refers to this Big Tobacco company as a “fast follower” rather than a leader in most markets. As a result, the company is likely to be more exposed to cigarettes in the future relative to its peers, which are investing in growth and moving away from the secular decline in cigarettes. Gorham nevertheless says Imperial Brands should remain a highly profitable and cash-generative business. The company’s investment is focused on categories and geographies where Imperial has existing strengths and where consumer demand is likely to be strong.

Reckitt Benckiser Group

• Price/Fair Value: 0.66
• Morningstar Uncertainty Rating: Medium
• Morningstar Capital Allocation Rating: Standard
• Industry: Household and Personal Products

Reckitt Benckiser Group joins our list of best stocks to buy for the first time this month, trading 34% below our fair value estimate of $17.10 per share. Reckitt’s portfolio includes a variety of household and consumer health brands, such as Lysol, Finish, Durex, and Mucinex. Reckitt’s portfolio is well positioned in categories that benefit from secular growth drivers across consumer health and hygiene, which should translate into growth ahead of its peer group in the midterm, says Morningstar analyst Diana Radu. The acquisition of Mead Johnson has added to its portfolio a leadership position in infant nutrition, though shares fell more than 15% in intraday trading on March 15 after an Illinois jury ordered Mead Johnson to pay $60 million in compensation to a mother whose premature baby died from complications linked to consumption of the company’s Enfamil infant formula.

Pfizer

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

A household name among drug manufacturers, Pfizer’s stock is currently trading at a 34% discount to its fair value estimate. The company’s large size gives it significant competitive advantages in developing new drugs, and its diverse portfolio of drugs helps insulate the company from any one particular patent loss, says Morningstar director Damien Conover. Pfizer reported fourth-quarter earnings ahead of our expectations, largely because of lower-than-expected research-and-development spending. In our view, the market likely doesn’t fully appreciate Pfizer’s cost-cutting program, recently launched drugs, and the potential of its pipeline. We think Pfizer stock is worth $42 per share.

Anheuser-Busch InBev

• Price/Fair Value: 0.68
• Morningstar Uncertainty Rating: Medium
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Beverages—Brewers

Anheuser-Busch InBev has built a vast global scale and regional density through past acquisitions like Grupo Modelo and SABMiller. AB InBev has a history of buying brands with promising growth platforms and then expanding distribution while squeezing costs from the businesses, which contributes to its Capital Allocation Rating of Exemplary. AB InBev’s worldwide scale and distribution is massive: Its top 20 brands each generate more than $1 billion per year in sales. Vast global scale and its monopolylike positions in Latin America and Africa give AB InBev significant fixed-cost leverage and procurement pricing power, argues Morningstar’s Gorham. We think there’s plenty of upside with the stock for patient investors. AB InBev stock trades 32% below our fair value estimate of $90 per share.

Polaris

• Price/fair value: 0.68
• Fair value uncertainty: Medium
• Capital Allocation Rating: Exemplary
• Industry: Recreational Vehicles

Polaris stock trades 32% below our fair value estimate of $145. 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: 0.69
• Morningstar Uncertainty Rating: Medium
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Beverages—Brewers

New to our list of best companies to buy now, Ambev stock trades 31% below our fair value estimate of $3.50 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’s Gorham, “and a reversal of that by the end of 2024 would increase the gross margin by 3 percentage points, all else equal.” Gorham also points to premiumization as a long-term growth and margin driver.

Estee Lauder

• Price/Fair Value: 0.69
• Morningstar Uncertainty Rating: Medium
• Morningstar Capital Allocation Rating: Standard
• Industry: Household and Personal Products

Rounding out our list of the best companies to buy now is beauty product producer Estee Lauder, which is trading 31% below our fair value estimate of $210 per share. 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 Lauder may need some time to refresh its lackluster cosmetics portfolio.

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.