From Give the media company name for www.morningstar.co.uk. Examples: “Reuters”, “CBS MarketWatch, “CNBC, “Wall Street Journal”, “Barchart”. Return only the company name.: 2024-07-02 11:32:00

create short ,engaging summaries of the news. Limit summaries to 50 words or less per paragraph. Ensure clarity and engagement, Include all facts, figures and statistics mentioned in the news article. Arrange summaries sequentially or by relevance in easy to read paragraph format. Verify accuracy and state only facts, ignore any promotional or marketing of services in the article:There may be a lot of doom and gloom surrounding UK equities at the moment, but patient investors still stand to benefit.Buying a share of a company essentially means buying a share of its future. Understanding the quality of a stock before investing is critical. The best companies will have a long-lasting competitive advantage, a balance sheet that demonstrates responsible capital allocations, and a steady and trustworthy cash flow. For investors in it for the long haul, Morningstar analysts say investing in stocks of companies with these qualities will offer a much more advantageous position than chasing short-term market fluctuations, or a short-lived boom of a low-quality business. With that in mind, here’s what to know about finding these “best” companies. How Did we Select the Best UK Companies to Invest in? A pillar to a company’s success lies in its competitive advantage, or “economic moat,” as famously coined by Warren Buffett. Morningstar analysts built on this idea, rating a company as having a Narrow, Wide, or no Economic Moat. This list of best UK companies to own is comprised of only companies with a wide economic moat, meaning their competitive advantage is strong enough to last at least 20 years. Predictable cash flows are key to our analysts’ ability to estimate how much each business is worth and feed into the Morningstar Uncertainty Rating. The Morningstar Uncertainty Rating ranges from low to extreme, capturing analysts’ confidence levels when assigning Fair Value Estimates. Lower uncertainty implies greater resilience to risks, such as sales sensitivity to economic fluctuations and product concentration. The UK stocks listed below have been screened to only include those with low or medium uncertainty levels. Last but certainly not least, a company’s capital allocation is evaluated considering investment strategies, balance sheets, and shareholder distributions. The Morningstar stock capital allocation rating looks at these factors from a shareholder perspective and a forward-looking basis. The list below only includes UK companies with standard or exemplary capital allocation. British American Tobacco (BATS) • Analyst: Kristoffer Inton• Sector: Consumer Defensive• Industry: Tobacco• Morningstar Rating: ★★★★★• Morningstar Uncertainty Rating: Medium• Capital Allocation Rating: Standard One of two tobacco companies on our list, British American Tobacco is neck-and-neck with Phillip Morris International (PMI) to be the largest listed global tobacco company. This Wide-Moat Stock is undervalued, trading well below its fair value with a price to fair value estimate of 0.63. “British American Tobacco is the world’s second largest tobacco company by volume, with cigarette sales to over 180 countries,” says analyst Kristoffer Inton. “But with global cigarette consumption declining about 5% per year, BAT has invested in several next-generation products that can deliver nicotine with reduced risk.” Diageo (DGE) • Analyst: Jelena Sokolova, CFA• Sector: Consumer Defensive• Industry: Beverages – Wineries & Distilleries• Morningstar Rating: ★★★★• Morningstar Uncertainty Rating: Low• Capital Allocation Rating: Standard This undervalued winery and distillery stock trades at £25.91 per share, below its Morningstar Fair Value Estimate of £31.00. Diageo owns globally known brands like Captain Morgan, Smirnoff Vodka, and Casamigos. “Diageo was created in 1997 following the merger of Grand Metropolitan and Guinness. Mergers and acquisitions remain part of the firm’s DNA, and subsequent transactions – some transformative, others bolt-on – have established Diageo as a global industry leader,” says analyst Jelena Sokolova. “Although the industry is fairly concentrated (we estimate a fourfirm concentration ratio of 0.6, above many other fast-moving consumer goods categories, including the global brewing industry at 0.5), we believe there is more consolidation to come. Outside the top five firms, the industry is highly fragmented, and regional players often dominate in niche product categories or local markets. These firms present a new wave of merger opportunities for the industry consolidators, including Diageo, to grow their developing markets footprint.” Imperial Brands (IMB) • Analyst: Kristoffer Inton• Sector: Consumer Defensive• Industry: Tobacco• Morningstar Rating: ★★★★★• Morningstar Uncertainty Rating: Medium• Capital Allocation Rating: Standard The second tobacco company on our list, Imperial Brands is currently 30% undervalued, trading at £20.43, while we think it’s worth £29, making it a 5-Star rated stock to invest in. “Imperial Brands is in the middle of a five-year strategic plan launched in 2021 that looked to position the firm as a fast follower in next-generation products while strengthening its share in its most important markets,” says analyst Kristoffer Inton. “This makes sense, given its relatively smaller size to peers like PMI and BAT, which leaves it less financial capacity to lead innovation. Although this means Imperial will be more exposed to cigarettes, it also implies that it can maximise its free cash flow generation and returns to shareholders.” Reckitt Benckiser Group (RKT) • Analyst: Diana Radu, CFA• Sector: Consumer Defensive• Industry: Household & Personal Products• Morningstar Rating: ★★★★★• Morningstar Uncertainty Rating: Medium• Capital Allocation Rating: Standard Reckitt’s wide-moat stock in the large blend space offers a bargain at £44.42 per share. The household and personal products company owns well-known brands like Lysol and Mucinex. “The majority of Reckitt’s portfolio is well positioned in categories that benefit from secular growth drivers across consumer health and hygiene,” says analyst Diana Radu. “The acquisition of Mead Johnson has added to its portfolio a leadership position in infant nutrition – a segment with substantial pricing power. However, the timing of the transaction, ahead of a period of declining birthrates and intensified competition in China, posed significant challenges and has dampened revenue growth in the last few years. Management sold the infant nutrition business in China in 2021, and the future of the remaining core infant nutrition business remains uncertain, especially given the ongoing premature infant fomula litigation in North America. “At the same time, we expect that further secular declines in birthrates in the US will continue to be a drag to the company’s mid-single-digit growth ambitions.” Unilever (ULVR) • Analyst: Ioannis Pontikis, CFA• Sector: Consumer Defensive• Industry: Household & Personal Products• Morningstar Rating: ★★★• Morningstar Uncertainty Rating: Low• Capital Allocation Rating: Standard Unilever is another household and personal product company, trading close to the Morningstar fair value estimate of £44. Its brands include Knorr soups and sauces, Hellmann’s mayonnaise, Axe and Dove skin products, and the TRESemmé haircare brand. “Although Unilever exhibited strong top-line performance during the coronavirus, the primary factor behind this was pricing in response to inflationary pressures and low demand elasticity in key categories,” says analyst Ioannis Pontikis, CFA. “While we anticipate pricing to remain a driver of top-line growth in 2024 and beyond, its impact should diminish in subsequent years. As the company shifts focus toward volume growth and mix, we expect organic growth to decelerate below 4% by the end of our explicit forecast period.” London Stock Exchange Group (LSEG) • Analyst: Niklas Kammer, CFA• Sector: Financial Services• Industry: Financial Data & Stock Exchanges• Morningstar Rating: ★★★• Morningstar Uncertainty Rating: Medium• Capital Allocation Rating: Exemplary The London Stock Exchange group is rated as exemplary for their capital allocation. This stock operates in the financial data and stock exchanges industry, and is currently being traded at its fair value of £96 per share. “The London Stock Exchange Group, or LSEG, has doubled down on its market data and analytics strategy. After the Refinitiv acquisition, the new group is now vertically integrated from pretrading data and analytics over trading venues down to post-trade clearing and reporting, albeit dominated by its data business,” says analyst Niklas Kammer, CFA. “Importantly, its assets form a strong symbiotic relationship wherein intellectual property generated within one strengthens the offering of the other, inducing demand for the group’s services.” AstraZeneca (AZN) • Analyst: Damien Conover, CFA• Sector: Healthcare• Industry: Drug Manufacturers – General• Morningstar Rating: ★★★• Morningstar Uncertainty Rating: Medium• Capital Allocation Rating: Exemplary AstraZeneca sells branded drugs across several major therapeutic classes, including gastrointestinal, diabetes, cardiovascular, respiratory, cancer, immunology and rare diseases. Its 3-Star rating reflects its current value being priced fairly, at £124 per share. “Following a pipeline review of AstraZeneca’s late-stage pipeline, we are increasing the long-term projections for several drugs, including camizestrant (breast cancer), capivasertib (breast cancer), eplontersen (rare disease), and danicopan (rare disease),” says analyst Damien Conover, CFA. “Based on an evaluation of the drugs’ efficacy and side effect profiles relative to the competitive landscape, these drugs look increasingly well positioned to develop into significant new blockbusters for the company. “As a result of the increased outlook for the pipeline drugs, we are increasing the firm’s US listed share class to $78…



Read more at Give the media company name for www.morningstar.co.uk. Examples: “Reuters”, “CBS MarketWatch, “CNBC, “Wall Street Journal”, “Barchart”. Return only the company name.: The Best UK Companies to Invest in