With the U.S. market appearing overvalued by many metrics, investors may be searching for opportunities that offer both stability and growth potential. In such an environment, focusing on companies with strong fundamentals, predictable cash flows, and competitive advantages can provide a sense of certainty. Morningstar’s Best Companies to Own list highlights businesses that meet these criteria, offering a starting point for investors looking to build a resilient portfolio.
However, even the best companies aren’t always the best stocks to buy if their valuations are too high. Paying the right price for a stock is just as important as the quality of the company itself. With that in mind, we’ve identified the 10 most undervalued stocks from Morningstar’s Best Companies to Own list as of February 27, 2025. These companies not only boast strong competitive advantages but also trade at attractive prices relative to their intrinsic value.
310 Best Undervalued Stocks to Buy Now—March 2025
Here are the top 10 undervalued stocks from Morningstar’s Best Companies to Own list:
- Huntington Ingalls (HII)
- A leader in defense and shipbuilding, Huntington Ingalls benefits from long-term government contracts and a strong competitive position in the aerospace and defense sector.
- Polaris (PII)
- A manufacturer of off-road vehicles, motorcycles, and snowmobiles, Polaris has a strong brand and a history of innovation, making it a standout in the recreational vehicle market.
- Brown-Forman (BF.B)
- Known for its iconic Jack Daniel’s brand, Brown-Forman is a resilient player in the spirits industry, with a global presence and pricing power.
- Rentokil Initial (RTO)
- A global leader in pest control and hygiene services, Rentokil benefits from recurring revenue streams and a strong market position.
- Pfizer (PFE)
- Despite recent challenges, Pfizer remains a pharmaceutical giant with a robust pipeline and a history of delivering strong cash flows.
- Constellation Brands (STZ)
- A leading beverage company, Constellation Brands has a strong portfolio of beer, wine, and spirits, including popular brands like Corona and Modelo.
- Campbell Soup (CPB)
- A staple in the consumer goods sector, Campbell Soup offers stability with its well-known brands and consistent demand for its products.
- GSK (GSK)
- This global pharmaceutical company has a diversified portfolio and a focus on innovation, making it a solid choice for long-term investors.
- Ambev (ABEV)
- As one of the largest brewers in Latin America, Ambev benefits from its dominant market position and exposure to emerging markets.
- Yum China (YUMC)
- The operator of KFC, Pizza Hut, and Taco Bell in China, Yum China is well-positioned to capitalize on the growing middle class and increasing consumer spending in the region.
2Why These Stocks Stand Out
These companies share several key characteristics that make them attractive investments:
- Competitive Advantages: Each company has a strong market position, brand recognition, or operational edge that sets it apart from competitors.
- Predictable Cash Flows: Many of these businesses generate steady, recurring revenue, providing a buffer against economic uncertainty.
- Undervalued Prices: Despite their strengths, these stocks are trading below their intrinsic value, offering a margin of safety for investors.
1Navigating an Expensive Market
In a market where valuations are stretched, focusing on undervalued stocks with strong fundamentals can help investors mitigate risk while still capturing growth opportunities. By prioritizing companies with competitive advantages and attractive valuations, investors can build a portfolio that is well-positioned to weather market volatility and deliver long-term returns.
As always, it’s important to conduct thorough research and consider your own financial goals and risk tolerance before making any investment decisions. The stocks listed above represent a starting point for investors seeking quality companies at reasonable prices in an otherwise expensive market.
