Morningstar lays out the 10 highest-conviction bets being made by US stock-pickers right now — and shares 4 Big Tech names that look cheap

Alphabet and Google logos

Summary List Placement

Morningstar’s “Ultimate Stock-Pickers” are sticking with the big bets they’ve held throughout the pandemic, even as investors more broadly are ditching some of those high-growth stocks that delivered such handsome returns. 

The research firm has consulted with 22 of America’s top billion dollar-plus mutual fund managers and 4 stock-pickers at large insurance firms to create its “Ultimate Stock-Pickers” list. Among the investment managers included in the assessment are Warren Buffett’s Berkshire Hathaway, American Funds Fundamental and Fidelity Growth Company.

“Our Ultimate Stock-Pickers continued their long-standing trend of buying and holding high-quality companies that Morningstar believes have developed sustainable competitive advantages,” the Chicago-based research firm said in a recent note.

The company describes the holdings as being either narrow, or wide economic moats. The term was popularized by veteran investor Warren Buffett, who heralded the virtues of “economic moats”, which refers to the ability of a business to maintain a competitive advantage over its competitors to protect its long-term profits and market share.

As the aggregate included in the list are long-term investors, Morningstar said “we were not surprised to see that the composition of our top 10 conviction stock holdings was the same as the prior quarter, with only Facebook overtaking Amazon to move to number seven on our top 10 conviction stock holdings list. Google’s holding company, Alphabet, maintained its number one spot on the list.”

Morningstar believes four of the top 10 companies on the conviction holdings list —Alphabet, Microsoft, Facebook, and Amazon— are undervalued right now, even though they have soared in value in the last couple of years in particular.

1. Alphabet

Ticker: GOOGL

Number of funds holding: 16

“Alphabet dominates the online search market with Google’s global share above 80%, via which it generates strong revenue growth and cash flow. We expect continuing growth in the firm’s cash flow, as we remain confident that Google will maintain its leadership in the search market.”

Source: Morningstar

2. Microsoft

Ticker: MSFT

Number of funds holding: 14

“Since taking over as CEO in 2014, Satya Nadella has reinvented Microsoft into a cloud leader. In our view, Microsoft has become one of two public cloud providers that can deliver a wide variety of PaaS/IaaS solutions at scale. Additionally, Microsoft has accelerated the transition from a traditional perpetual license model to a subscription model.”

Source: Morningstar

3. Comcast

Ticker: CMCSA

Number of funds holding: 17

“Comcast’s core cable business, which accounts for more than half of the firm’s value, enjoys significant competitive advantages.”

Source: Morningstar

4. Apple

Ticker: APPL

Number of funds holding: 10

“Apple’s competitive advantage stems from its ability to package hardware, software, services, and third-party applications into sleek, intuitive, and appealing devices. This expertise enables the firm to capture a premium on its hardware, unlike most of its peers. Despite its admirable reputation, loyal customer base, and unique products, the consumer hardware space can be unforgiving to firms unable to consistently satiate the customer’s appetite for more features.”

Source: Morningstar

5. Bank of America

Ticker: BAC 

Number of funds holding: 12

“After more than a decade of work, Bank of America now has one …read more

Source:: Business Insider


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