To The Moon

I came across this post from Morningstar (MS)- a leading investment research and financial services firm.

The title caught my attention, so I decided to take a peep to see what’s new.

After reading, I think its worth a share so here it is.

Investors often hold blue-chip stocks at the core of their portfolios. That makes sense.

After all, blue-chip companies are leaders in their industries and their names are familiar to investors.

Definition of Blue-Chips.

Blue-chip stocks are from companies that are (a) large, (b) well-established, and (c) financially sound.

These companies have strong brand equity and reputations, and they generate dependable earnings.

Blue-chip companies usually boast consistent dividends and are often considered less risky, given their financial stability.

However, investors may differ in how they define blue-chip companies:

• Some investors demand that a blue-chip stock be included in a particular index, such as the Dow.

• Others may include only dividend-paying companies on their lists of blue-chip stocks.

• Still others may have specific market-cap thresholds for blue-chip companies.

Morningstar’s definition.

The companies on MS’s list of the best blue-chip stocks to buy for the long term share a few qualities:

• The stocks are from companies included on MS’s list of the Best Companies to Own for 2025. Companies on this list have wide MS Economic Moat Ratings and predictable cash flows, and they are run by management teams that make smart capital allocation decisions.

• These stocks look undervalued, which means they’re trading below Morningstar’s fair value estimates.

• Their market caps top $100 billion.

10 Best Blue-Chip Stocks for Long Term (February 2025)

They are the largest firms by market cap on MS’s Best Companies to own list whose stocks were at least -15% undervalued as of 21 Feb 2025.

1. Anheuser-Busch InBev BUD

2. Pfizer PFE

3. Nike NKE

4. Taiwan Semiconductor Manufacturing TSM

5. Roche RHHBY

6. Alphabet GOOGL

7. Danaher DHR

8. Caterpillar CAT

9. Merck MRK

10. Nestle NSRGY

*Note: data mentioned was of 21 Feb 2025, about 2 weeks ago.

Due to real estate limits, I will do selective reviews on stocks that are relatively “unfamiliar”, so that we can learn new things.

(1) $Anheuser-Busch Inbev SA(BUD)$

• Market Capitalization: $106 billion

• MS Price/Fair Value: 0.60.

• MS Style Box: Large Core

• Trailing 12-Month Yield: 1.61%.

• MS Capital Allocation Rating: Exemplary

• Industry: Beverages—Brewers

Anheuser-Busch InBev is the most undervalued company on MS’s list of best blue-chip stocks to buy.

It has built a vast global scale and regional density through past acquisitions like Grupo Modelo and SABMiller.

The brewer’s strategy is to buy brands with a promising growth platform, expand distribution, and ruthlessly squeeze costs from the business, observes MS analyst Verushka Shetty.

AB InBev has one of the strongest cost advantages in Morningstar’s consumer defensive coverage and is among the most efficient operators.

Its free cash flow (FCF) conversion has been consistently higher than peers’ in recent years, but it needs to continue to deleverage its balance sheet to reduce its earnings volatility.

AB InBev stock trades -40% below MS’s fair value estimate of $90 per share.

Strangely enough, BUD seems to impervious to Trump’s tariff woes that have afflicted US stock market pretty badly but not it.

It has been recovering steadily from its 10 Jan 2025’s low of $46.15 per share. (see above)

(2) $Pfizer(PFE)$.

• Market Capitalization: $149 billion

• MS Price/Fair Value: 0.63

• MS Style Box: Large Value

• Trailing 12-Month Yield: 6.43%

• MS Capital Allocation Rating: Standard

• Industry: Drug Manufacturers—General

Pfizer is 1 of 4 healthcare companies that made it to MS list of the best blue-chip stocks to buy, and it offers the highest trailing yield of the group.

A household name among drug manufacturers, Pfizer’s stock is currently trading at a -37% discount to its fair value estimate.

The firm has strong cash flows generated from a basket of diverse drugs, says MS strategist Karen Andersen.

Further, the company’s large size confers significant competitive advantages in developing new drugs.

MS expect steady growth until 2028 when patent losses will likely increase, but pipeline advancements hold the potential to mitigate pressures.

MS think Pfizer stock is worth $42 per share.

I still cannot wrap my head around the fact that PFE, the one-time high-profile drug stock ($55) during 2022 covid pandemic has fallen to current $26 per share stock.

Was it a case of a one-trick pony that got lucky during the covid-pandemic ?

(3) $Danaher(DHR)$.

• Market Capitalization: $150 billion

• Morningstar Price/Fair Value: 0.78

• Morningstar Style Box: Large Value

• Trailing 12-Month Yield: 1.63%

• Morningstar Capital Allocation Rating: Exemplary

• Industry: Diagnostics and Research

Medical technology company Danaher offers differentiated technology that is protected by various intangible assets, including (i) patents, (ii) brands, (iii) copyrights, and (iv) trademarks, observes MS senior analyst Julie Utterback.

Danaher seeks out attractive markets and makes acquisitions to enter or expand within those fields, and it also divests assets that are no longer core to the business.

The company’s acquisition-focused strategy has contributed to it becoming a top-five player in the highly fragmented and relatively sticky life science and diagnostic tool markets.

Danaher stock trades at an -22% discount to MS’s fair value estimate of $270 per share.

This life sciences and biotechnology company:

• Met its Q4 2024 earnings’ revenue with $6.54 billion and a bit more, but slower than its peers.

• It Q4 earnings per share (EPS) of $5.29, failed to meet analysts’ estimates ($5.57).

• A weak outlook and guidance for Q1 2025 set the stage for its fall since early February 2025.

(4) $Merck(MRK)$.

• Market Capitalization: $226 billion

• Morningstar Price/Fair Value: 0.81

• Morningstar Style Box: Large Value

• Trailing 12-Month Yield: 3.49%

• Morningstar Capital Allocation Rating: Standard

• Industry: Drug Manufacturers—General

Merck’s combination of a wide lineup of high-margin drugs and a pipeline of new drugs should ensure strong returns on invested capital over the long term, says MS’s Andersen.

After several years of mixed results, Merck’s R&D productivity is improving as the company shifts more toward areas of unmet medical need.

Merck’s new products have mitigated the generic competition, offsetting recent major patent losses.

• In particular, Keytruda for cancer represents a key blockbuster with multi-billion-dollar potential.

MS expect Keytruda’s leadership in non-small cell lung cancer and several other cancers will be a key driver of growth for the firm over the next few years, but the 2028 US patent loss on the drug will create eventual pressure.

Merck stock is trading -19% below MS’s fair value estimate of $111 per share.

Similiar to Pfizer, its muddled Q4 earnings coupled with a single-digit growth outlook / guidance for current 2025 quarter, left investors worried and they bailed.

With the speculators out of the equation, the stock is steel focus on getting back on track with its workload cut out for it.

My viewpoints: (mine only)

Initially, I wanted to share pharmaceutical stocks Roche (RHHBY) & Nestle (NSRGY).

As they are traded over-the-counter, it comes with its inherent risks and challenges like (a) limited info and transparency, (b) potential liquidity issue, (c) price volatility etc…

In the end, I decided not to focus on them.

If you have read my post dated 20 Feb 2025(click here ! for details) you would have realized that Healthcare remains strong contender for investment in the current volatile US market landscape.

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