Morningstar Ultimate Stock Pickers' Top Selections

The stock pickers include 22 money managers who oversee mutual funds covered by Morningstar analysts.

With the S&P 500 down 17% this year, you may be thinking this is a good time to pick up some stock bargains.

Here are companies you may want to consider. Morningstar has created a list of what it calls the top 10 conviction picks of its “ultimate stock pickers.”

The pickers include 22 money managers who oversee mutual funds covered by Morningstar analysts and four who run the investment portfolios of large insurance companies.

High conviction holdings represent ones that are large relative to the size of the portfolio. Here’s the list in order of conviction (with the highest conviction first).

1. Alphabet  (GOOGL) - Get Free Report, held by 19 funds
2. Microsoft  (MSFT) - Get Free Report, held by 16 funds
3. Apple  (AAPL) - Get Free Report, held by 12 funds
4. UnitedHealth  (UNH) - Get Free Report, held by 14 funds
5. Amazon  (AMZN) - Get Free Report, held by 12 funds
6. Bank of America  (BAC) - Get Free Report, held by 14 funds
7. Wells Fargo  (WFC) - Get Free Report, held by 15 funds
8. Visa  (V) - Get Free Report, held by 13 funds
9. Charles Schwab  (SCHW) - Get Free Report, held by 13 funds
10. Johnson & Johnson  (JNJ) - Get Free Report, held by 11 funds.

Alphabet: Morningstar analyst Ali Mogharabi assigns the company a wide moat (durable competitive advantage) and puts fair value for the stock at $160. It recently traded at $97. That's 65% below fair value.

“Alphabet reported disappointing third-quarter results as revenue growth decelerated further, driven by the stronger dollar and economic uncertainty, which is increasing hesitancy in ad spending,” he wrote in a commentary.

“Assuming less uncertainty in the macroeconomic environment, plus the monetization of YouTube Shorts, we expect advertising revenue growth to return to double-digit levels in 2023.”

YouTube Shorts already has reached 1.5 billion monthly active viewers, Mogharabi said. Meanwhile, “unlike advertising, the cloud business maintained impressive growth” in the third quarter, he said.

Microsoft: Morningstar analyst Dan Romanoff gives the company a wide moat and puts fair value for the stock at $320. That's 31% above recent trades at $245.

“Microsoft reported solid fiscal first-quarter 2023 results” in October, he wrote. “The outlook, however, was worse than our below-consensus model was contemplating. Macro pressures continue to weigh on the company’s performance.”

But “we continue to find encouragement in Azure [Microsoft’s cloud offering], migration to Office E5 [a suite of productivity apps], and traction with the Power [software applications] platform for long-term value creation,” Romanoff said.

Still, “we think near-term pressures will not be exhausted within the next quarter,” he said.

Apple: Morningstar analyst Abhinav Davuluri assigns the company a narrow moat and puts fair value for the stock at $130, 9.1% below recently trades at $143.

“Apple reported impressive fiscal fourth-quarter results [in October] that came ahead of our estimates thanks to iPhone and Mac strength,” he wrote in a commentary.

“While we remain positive on Apple's ability to extract revenue and robust profits from its installed base via new products and services, we believe demand for the company's products is likely to slow in the next few quarters following several stellar quarters of growth.”