Berkshire Tops Morningstar List of Blue-Chip Stocks

Berkshire Tops Morningstar List of Blue-Chip Stocks

Warren Buffett's Berkshire Hathaway has generated an annualized return of 11.33% over the past five years.

When building your stock portfolio, it’s a good idea to start with blue-chip stocks, many experts agree.

And why is that? “Blue-chip stocks are from companies that are large, well-established, and financially sound,” writes Morningstar investment specialist Susan Dziubinski.

“These companies are leaders in their industries, with strong brand names and reputations, and they generate dependable earnings. Blue-chip stocks usually boast consistent dividends and are often considered to be less risky, given the financial stability of these companies.”

Morningstar put together a list of the best 10 blue-chip stocks to buy for the long term. As for criteria to make the list, one is membership in Morningstar’s roster of the Best Companies to Own for 2023.

“Companies on this list have wide Morningstar moat ratings and predictable cash flows,” Dziubinski said. A wide moat means Morningstar sees the company with competitive advantages for 20 years or more.

Also, the companies are “run by management teams that make smart capital-allocation decisions,” she said. And the stocks are undervalued compared to Morningstar’s fair value estimates. They have market capitalizations over $100 billion as well.

Morningstar's Top 10

Here’s the roster. The stocks were all at least 10% undervalued as of June 2.

1. Berkshire Hathaway  (BRK.B) - Get Free Report, Warren Buffett’s conglomerate. Morningstar fair value: $370. Friday’s close: $335.

“Berkshire, owing to its diversification and its lower overall risk, offers one of the better risk-adjusted return profiles in the financial-services sector,” wrote Morningstar analyst Greggory Warren. “And it remains a generally solid candidate for downside protection during market selloffs.”

2. Taiwan Semiconductor Manufacturing  (TSM) - Get Free Report, the chip giant. Morningstar fair value: $139. Friday’s close $103.

“TSMC is a significant beneficiary of high performance computing, with upside-surprise potential from generative artificial intelligence,” wrote Morningstar analyst Phelix Lee. “Confidence in its long-term outlook has been renewed by its resilient capital spending budget.”

3. Roche  (RHHBY) , the big Swiss drug company. Morningstar fair value: $57. Friday’s close: $39.

“Roche's drug portfolio and industry-leading diagnostics conspire to create maintainable competitive advantages,” wrote Morningstar analyst Karen Andersen. It’s “in a unique position to guide global health care into a safer, more personalized, and more cost-effective endeavor.”

4. Bank of America  (BAC) - Get Free Report, the money-center bank. Morningstar fair value: $37. Friday’s close: $29.

“Bank of America reported decent first-quarter results, showing that the bank’s deposit base and funding costs are tracking roughly as would have been expected, even before the Silicon Valley Bank implosion,” wrote Morningstar analyst Eric Compton.”

5. Pfizer  (PFE) - Get Free Report, the pharmaceutical stalwart. Morningstar fair value: $48. Friday’s close: $39.

6. Cisco Systems  (CSCO) - Get Free Report, the provider of network technology. Morningstar fair value: $56. Friday’s close: $50.

7. Thermo Fisher Scientific  (TMO) - Get Free Report, the science equipment provider. Morningstar fair value: $590. Friday’s close: $518.

8. Comcast  (CMCSA) - Get Free Report, the media/telecommunications/entertainment titan. Morningstar fair value: $60. Friday’s close: $40.

9. Wells Fargo  (WFC) - Get Free Report, the big bank. Morningstar fair value: $58. Friday’s close: $42.

10. Honeywell International  (HON) - Get Free Report, the industrial conglomerate. Morningstar fair value: $225. Friday’s close: $198.

BY DAN WEIL

Dan is a freelance writer whose work has appeared in The Wall Street Journal, Barron's, Institutional Investor, The Washington Post and other publications.

https://www.thestreet.com/investors/berkshire-morningstar-blue-chip-stocks