'5 ultracheap stocks with the best return on investment' — Morningstar

With the S&P 500 having jumped 19% year to date, this may not be the best time to purchase stocks.

But if you do want to buy, you might consider these five cited by Morningstar. They had to make it through several of the firm’s filters. Those are:

• Stocks that have returned more than the Morningstar US Market Index on an annualized basis over the past 10 years.
• Companies with average three-year return on invested capital exceeding 20%.
• Companies with wide or narrow Morningstar moat ratings. “Wide” means Morningstar sees the company having competitive advantages for at least 20 years. “Narrow” means at least 10 years.
• Stocks that were trading at least 20% below Morningstar’s fair value estimates as of Nov. 28.

As for the fearsome five, “while we can’t predict whether these companies and stocks will continue to generate top returns on investment, we do expect them to be competitive during the coming decade,” Morningstar said.

Here are the winners, starting with the most undervalued as of Nov. 28.

Technology Stalwarts

1. Teradyne  (TER) - Get Free Report, a provider of testing equipment for semiconductors

Morningstar moat: wide. Morningstar fair value estimate: $147. Wednesday price quote: $91.75.

“Teradyne is a heavyweight supplier of automated test equipment for semiconductors, boasting market-leading capabilities that run the gamut of chips,” wrote Morningstar analyst William Kerr. “It can produce testers for the most cutting-edge semiconductors.”

2. Taiwan Semiconductor Manufacturing  (TSM) - Get Free Report, the world’s largest contract chip maker

Morningstar moat: wide. Morningstar fair value estimate: $139. Wednesday price quote: $97.80.

TSMC benefits from “semiconductor firms transitioning from integrated device manufacturers to fabrication-less designers,” wrote Morningstar analyst Phelix Lee.

Another factor boosting the company: “growth of artificial intelligence, Internet of Things, and high-performance computing applications may last for decades,” Lee said.

3. Skyworks Solutions  (SWKS) - Get Free Report, chip maker for wireless headsets

Morningstar moat: narrow. Morningstar fair value estimate $133. Wednesday price quote: $100.50.

“Skyworks Solutions is a leading supplier of radio frequency components to smartphone makers and other electronics device makers,” wrote Morningstar analyst Brian Colello.

“Although the company faces an intense competitive landscape, it should thrive as the handset industry focuses on 5G devices.”

4. MarketAxess  (MKTX) - Get Free Report, an electronic bond trading platform

Morningstar moat: wide. Morningstar fair value estimate: $305. Wednesday price quote: $264.80.

“As MarketAxess rolls out new features such as automated trade execution and expands its Open Trading all-to-all network, the cost and liquidity advantages of electronic trading networks over traditional methods continues to increase,” wrote Morningstar analyst Michael Miller.

5. Edwards Lifesciences  (EW) - Get Free Report, a maker of medical devices for heart disease

Morningstar moat: narrow. Morningstar fair value estimate: $86. Wednesday price quote: $69.70.

“Over the last two decades, Edwards Lifesciences has demonstrated that it knows how to maintain leadership through innovation of tissue heart valves,” wrote Morningstar analyst Debbie Wang.

“Edwards remains the dominant force in surgical heart valves and minimally invasive valve therapy.”