with Morningstar. Investors have endured a lot of stock market uncertainty this year due to high inflation, rising interest rates, and a slowing economy.
During uncertain times, 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
list comes in. The companies on this list have significant competitive advantages, and we think those advantages are stable or growing. 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 firms aren’t always the best stocks to buy at a given point in time. How much an investor pays to own a company is important, too. With that in mind, here are three companies on our list whose stocks look undervalued today.
3 of the Best Stocks to Buy Before Labor Day
These wide-moat companies are considered
. Data as of Aug. 29.
- Equifax EFX
- Salesforce CRM
- Zimmer Biomet ZBH
The first is Equifax EFX. One of the leading credit bureaus in the United States, Equifax faces strong headwinds today as mortgage market weakness—and a subsequent decline in mortgage credit inquires—takes a toll. We nevertheless think the market is being overly harsh. In fact, Morningstar think Equifax’s Workforce Solutions segment is differentiated and growing at a healthy clip.
Next is Salesforce CRM, which Morningstar thinks is a top long-term growth story in software. While the enterprise cloud computing solution provider likely faces a dip in revenue growth below 20% at some point in the next few years, we think ongoing margin expansion will provide compound earnings growth of more than 20% for much longer. And we expect the firm to continue to benefit from cross-selling and upselling, pricing actions, international growth, and continued acquisitions. Lastly, there's Zimmer Biomet ZBH. Zimmer Biomet is the leader in large-joint reconstruction—and Morningstar expects demand for large-joint replacement to be solid, thanks to favorable demographics that include aging baby boomers and rising obesity. The company has cultivated close relationships with orthopedic surgeons and therefore enjoys vendor loyalty, which has helped the company dig a wide economic moat. Analyst Rajiv Bhatia and senior analysts Dan Romanoff and Debbie Wang provided the research behind this segment. Watch 4 Stocks to Play the Consumer Shift in Consumer Spending and 6 More Stocks to Play the Shift in Consumer Spending for additional investment ideas.