From Morningstar:

The S&P 500 reached a new record high, but 2024 is far from risk-free. Economic and financial conditions remain challenging with the fight against inflation at the top of central banks’ agenda. Morningstar analysts have identified the Best Companies to Own in the US, totaling 137, with competitive advantages and predictability in cash flow.

The companies that top the list have strong competitive advantages, predictable cash flows and are managed by teams that make smart capital allocation decisions. These businesses also take sustainability into account, as a company’s longevity and competitive advantage are inherently tied to sustainability, particularly environmental, social, and governance considerations.

Predictable cash flows and smart capital allocation are key criteria for the companies on the list, as they help analysts more accurately estimate business worth. Owning a share of a company means owning a piece of the company, and understanding its quality is crucial.

The idea behind the list is that, in the long run, a stake in a high-quality business is a better position than chasing market movements. It’s important not only to focus on the best companies, but also on the stock price, ensuring the share prices are undervalued compared to the fair value estimated by in-depth analysis.

The article discusses the 10 best European companies with an economic moat, exemplary Morningstar Capital Allocation Rating, positive Morningstar Rating, and medium or low Uncertainty Rating. All underrated compared to fair value, a judgment on how the company’s management increases shareholders’ returns.



Read more: 10 Undervalued High Quality Stocks