Morningstar’s Top 10 Stocks for the New Decade: Insights from Our Analysts

Morningstar’s Top 10 Stocks for the New Decade: Insights from Our Analysts

At Morningstar, our team of expert analysts is dedicated to providing data-driven, in-depth, and unbiased research to help investors make informed decisions. As we enter a new decade, our analysts have identified the following

top 10 stocks

as key players in their respective industries:

1. link

   Reason: Continued growth in services and innovation in hardware.

2. link

   Reason: Strong position in cloud computing and productivity software.

3. link

   Reason: Dominance in digital advertising and growth in other areas like cloud computing.

4. link

   Reason: Continued expansion in e-commerce and cloud computing.

5. link

   Reason: Growing user base and increasing revenue from advertising.

6. link

   Reason: Competitive edge in semiconductors and data centers.

7. link

   Reason: Leadership in electric vehicles and growing presence in energy storage.

8. link

   Reason: Continued innovation in biotech and strong financials.

9. link

   Reason: Diversified consumer goods portfolio and strong brand recognition.

Disclaimer:

Past performance is not a guarantee of future results. This information is provided for educational purposes only and does not constitute investment advice or an offer to buy or sell securities. Investing involves risk, including possible loss of principal.

Morningstar’s Top 10 Stock Picks for the New Decade

Morningstar, a leading provider of independent investment research, has long been a trusted source for investors seeking insightful analysis and guidance. With the new decade upon us, choosing the right stocks is more important than ever, as markets continue to evolve and present both opportunities and challenges.

Why Morningstar Matters

Morningstar’s team of analysts, with their deep domain expertise and rigorous research methodologies, provide valuable insights to help investors make informed decisions. By combining both quantitative and qualitative data, Morningstar offers unbiased, comprehensive analysis that goes beyond mere stock prices and market trends.

The Significance of the Right Stocks

As we enter a new decade, the economic and market landscape is poised to change significantly. With advances in technology, shifting demographics, and evolving regulatory environments, choosing the right stocks becomes critical for long-term success. By identifying companies with strong fundamentals, solid growth potential, and competitive advantages, investors can build portfolios that not only weather market volatility but also generate attractive returns.

Morningstar’s Top 10 Stock Picks

Every year, Morningstar’s team of analysts identify the top stocks that they believe will outperform the market. For the new decade, these are their top 10 picks:

1. Microsoft Corporation (MSFT)
2. Alphabet Inc. Class A (GOOGL)
3. Apple Inc. (AAPL)
4. Amazon.com, Inc. (AMZN)
5. Alibaba Group Holding Limited (BABA)
6. Tesla, Inc. (TSLA)
7. Visa Inc. (V)
8. Mastercard Incorporated (MA)
9. Microsoft Corporation (MSFT) – Azure
10. NVIDIA Corporation (NVDA)

Methodology and Criteria for Selection

Methodology and Criteria for Selection: Understanding Morningstar’s approach to selecting the top 10 stocks requires a brief overview of their research process and investment philosophy.

Description of Morningstar’s Research Process and Investment Philosophy

Morningstar, a leading independent investment research firm, employs an evidence-based, fundamental analysis approach to evaluate securities. They consider various factors like a company’s financial health, growth potential, competitive advantage, and valuation when making investment recommendations.

Explanation of the Criteria Used to Identify the Top 10 Stocks

Growth Potential:

Morningstar seeks companies with a robust and sustainable growth rate, driven by factors like expanding markets, innovative products or services, and strong competitive positions.

Competitive Advantage:

Companies with a defensible competitive advantage can protect their market position from competitors and generate consistent earnings over time. Morningstar looks for businesses with barriers to entry, cost advantages, or network effects.

Financial Health:

A healthy financial position is crucial for long-term success. Morningstar assesses a company’s debt levels, cash flow generation, and profitability to determine its financial health.

Valuation:

Valuation plays a critical role in selecting stocks that offer attractive returns. Morningstar evaluates the price-to-earnings (P/E) ratio, price-to-book (P/B), and other relevant valuation metrics to determine if a stock is undervalued or overvalued.

Discussion on How the Picks Align with Broader Trends Shaping the Global Economy in the New Decade

In today’s global economy, various trends are shaping the investment landscape. Morningstar’s top 10 stocks align with these trends, including technology (, ), sustainability (, ), and demographic shifts (, ).

I Top Stock Pick 1:

Apple Inc. (AAPL)

Overview of Apple’s business and recent performance:

Apple Inc. is a leading technology company known for designing, manufacturing, and marketing consumer electronics, computer software, and online services. Its major hardware products include the iPhone smartphone, iPad tablets, Mac personal computers, Apple Watch, AirPods, and other accessories. The company’s services segment includes offerings like the App Store, Apple Music, iCloud storage, and AppleCare support. In Q3 2021, Apple reported impressive earnings with a revenue growth of 36% YoY.

Analysis by Morningstar equity analyst Dan Romanoff:

According to Morningstar‘s equity analyst Dan Romanoff, Apple is a top pick for the new decade due to its innovative products, strong brand, and competitive position in various markets. Romanoff highlights the success of the iPhone, which continues to be a cash cow for Apple, with over 2 billion devices currently in use. He also mentions the company’s services segment as a significant growth driver, which has seen steady revenue increases and now contributes to over 18% of Apple’s total sales. Furthermore, Romanoff believes that Apple’s entry into new markets like wearables, augmented reality (AR), and automotive technology positions the company for long-term success.

Discussion of potential risks and challenges:

Despite its strong position, Apple faces several risks and challenges. One major concern is the intensifying competition in its markets, particularly from companies like Samsung, Google, Microsoft, and Amazon. Additionally, Apple continues to deal with supply chain disruptions and component shortages, which can impact its ability to meet demand. Regulatory challenges in various markets, especially regarding privacy concerns and antitrust investigations, could also impact Apple’s operations and reputation.

Opportunities for growth:

Despite these challenges, there are several opportunities for growth that Apple can explore. The company’s entry into the AR market, with products like the Apple Glass and the recently announced AR headset, could revolutionize industries like gaming, education, and healthcare. Furthermore, Apple’s investment in autonomous vehicles through its Project Titan could position the company as a major player in the automotive industry. Additionally, expanding its presence in emerging markets like India and Africa, where smartphone penetration is still low, could help Apple tap into new customer bases and increase revenue.

Top Stock Pick 2: Microsoft Corporation (MSFT)

Overview: Microsoft Corporation, a global technology leader, has been transforming its business model since Satya Nadella took the helm as CEO in 201The company’s core offerings include the Microsoft Windows line of operating systems, the Office suite, and server products such as SQL Server and Visual Studio. However, Microsoft’s recent focus on cloud services through Azure, gaming with the Xbox platform, and artificial intelligence (AI) initiatives have set the company apart from its competitors.

Recent Performance:

Microsoft’s recent performance has been impressive, with double-digit revenue growth in its Intelligent Cloud segment, which includes Azure and server products. In Q3 FY2021, the company reported revenue of $43.1 billion, up 17% YoY, and a GAAP EPS of $1.5The success of Azure has driven Microsoft’s growth, with revenue increasing 48% YoY in Q3 FY2021.

Morningstar’s Analysis:

“Microsoft is our top pick for large-cap IT,” stated Morningstar equity analyst Ali Mogharabi. “The company’s shift to the cloud is driving its growth, and Azure’s market share continues to expand. Moreover, Microsoft’s growing presence in gaming through Xbox and AI initiatives like Project Cortex further solidify its position as a major player in the technology industry.”

Risks and Challenges:

Despite its strong performance, Microsoft faces potential risks and challenges. Competition from Amazon Web Services (AWS) and Google Cloud Platform in the cloud market remains fierce. Furthermore, Microsoft’s gaming division has significant competition from other console makers like Sony and Nintendo. However, opportunities for growth also exist, such as expanding its presence in emerging markets and increasing partnerships with other tech companies.

Top Stock Pick 3: Amazon.com, Inc. (AMZN)

Amazon.com, Inc., a

global technology leader

based in Seattle, Washington, dominates the e-commerce market and has become a major player in several other industries. With annual revenue exceeding $386 billion in 2020, Amazon’s reach extends beyond online retail to

cloud computing

(Amazon Web Services),

advertising

(Amazon Ads), and

streaming media

(Prime Video).

According to Morningstar equity analyst Dan Dolev, Amazon’s position as a top pick for the new decade is due to its unparalleled dominance in e-commerce and expanding presence in various markets. Dolev emphasizes that Amazon’s market share in the U.S. stands at

nearly 40%

and continues to grow, while international markets offer ample opportunity for expansion. Furthermore, Dolev asserts that Amazon’s investments in cloud computing, advertising, and streaming media are crucial to maintaining its competitive edge.

While the future looks bright for Amazon, there are potential risks and challenges facing the company. These include

rising competition

from retail giants like Walmart and Target, as well as increasing regulatory scrutiny in areas like antitrust. However, Amazon’s continued innovation and ability to adapt to new challenges make it an attractive investment opportunity for those willing to take on some risk.

In conclusion,

Amazon.com, Inc.

is a top stock pick for the new decade due to its dominance in e-commerce and expanding presence in areas like cloud computing, advertising, and streaming media. Although there are risks and challenges facing the company, its ability to innovate and adapt makes it an attractive investment opportunity for those willing to take on some risk.

Top Stock Pick 4: Alphabet Inc. (GOOGL)

I. Overview of Alphabet’s Business and Recent Performance

Alphabet Inc. (GOOGL) is a leading technology company known primarily for its innovative internet products and services. The company’s most recognized brand is Google, which dominates the digital advertising market with a 32% global share. Google’s core business segments include:

• Search: Google Search, Google Maps, Google Drive

• YouTube: Video sharing platform

• Cloud: Google Cloud Platform, G Suite (Google Docs, Sheets, Slides)

• Hardware: Google Home, Google Nest, Google Pixel phones

In Q3 2021, Alphabet reported impressive revenue growth of 29% YoY to $65.1 billion. Google’s “Other revenues” category, which includes YouTube and cloud services, accounted for over half of the total revenue at $35.7 billion.

Top Pick for the New Decade by Morningstar Equity Analyst Ali Hacedinne

According to Morningstar equity analyst Ali Hacedinne, Alphabet is a top pick for the new decade. Here’s why:

Leadership in Digital Advertising

Google’s dominance of the digital advertising market is unmatched:

• Search: 92% of US search ad revenue
• Display: 17.8% global digital display market share
• Video: 23.5% of US digital video ad revenue

Growing Presence in Areas like Cloud Computing and Hardware

Google’s expansion into new markets is a significant opportunity:

• Cloud computing: Google Cloud Platform is gaining traction and could rival Amazon Web Services (AWS) and Microsoft Azure.
• Hardware: Google Pixel phones have seen increasing success, capturing 1% of the global smartphone market.

I Potential Risks and Challenges Facing Alphabet

Despite its dominance, Alphabet faces significant risks and challenges:

Regulatory Risks

Antitrust regulators in the US and Europe have taken a closer look at Alphabet’s market power, which could lead to increased scrutiny or regulatory action.

Competition

Amazon, Microsoft, and Facebook pose significant competition in various markets where Alphabet operates.

Privacy Concerns

Heightened privacy concerns, particularly in the wake of data scandals, could impact Alphabet’s ability to monetize user data.

Opportunities for Growth

However, there are also growth opportunities:

Expansion into Emerging Markets

Alphabet has significant untapped potential in emerging markets like India and Southeast Asia.

Continued Innovation

Google’s history of innovation could lead to new products and services that capture market share and generate revenue.

Top Stock Pick 5: Visa Inc. (V)

Visa Inc., a leading global payments technology company, has been at the forefront of facilitating digital transactions since its inception. With a

market capitalization

of over $500 billion and a presence in more than 200 countries, Visa processes approximately 150 billion transactions per year. This

giant

in the digital payments processing industry has seen a remarkable recent performance, with net revenue growing by 13% year-over-year in Q2 2022.

According to

link

, Visa’s scale and competitive advantage in the

growing digital payments market

make it an exceptional

top pick

for the new decade. Visa’s extensive network, partnerships with major financial institutions, and robust technology infrastructure position it to capture a significant share of the burgeoning digital payments market.

However, no business comes without risks and challenges. Visa faces

potential risks

such as increased competition from tech giants like Apple Pay, Google Pay, and Square’s Cash App. Additionally, data security concerns and regulatory issues could impact Visa’s growth prospects. Nevertheless, the company is constantly innovating to stay ahead of competitors by introducing new products and services like Visa Checkout, Visa Ready, and Visa Token Service. Furthermore, Visa’s strategic expansion into emerging markets offers significant

growth opportunities

.

Top Stock Pick 6: Mastercard Incorporated (MA)

Overview of Mastercard’s Business and Recent Performance

Mastercard Incorporated (MA) is a leading global payments technology company. With more than 2.7 billion cards in circulation, the company connects consumers, financial institutions, merchants, governments, and businesses around the world. Masterpass, Mastercard’s digital payment service, provides a simple, convenient, and secure way to make purchases online, in-app, or in person. The company’s recent financial performance is impressive: Q4 2020 revenue grew by 13%, reaching $5.3 billion, and net income increased by 28% to $2.4 billion.

Analysis by Morningstar Equity Analyst James Cakmak

According to Morningstar equity analyst James Cakmak, Mastercard is a top pick for the new decade due to its competitive position in the digital payments landscape. “Mastercard is not just a payment network; it’s a technology company,” he says. The company’s focus on innovation and partnerships has enabled it to adapt to the changing market. For instance, its collaboration with fintech firms like Stripe and Marqeta allows Mastercard to expand its reach beyond traditional banking institutions. Furthermore, acquisitions such as VocaLink, a UK-based payments processor, and TransFast, a cross-border payment platform, provide opportunities for growth.

Potential Risks and Challenges, as well as Opportunities for Growth

While there are potential risks and challenges facing Mastercard, the opportunities for growth outweigh them. One risk is increased competition from emerging digital payment platforms like PayPal and Square. However, Mastercard’s strong brand recognition and extensive network of partners give it a competitive edge. Another challenge is regulatory scrutiny, particularly regarding data security and privacy concerns. Mastercard has been investing in advanced security measures to address these issues. Lastly, the company’s expansion into new markets like India and China presents significant opportunities for growth. With a growing middle class and increasing smartphone penetration, digital payments are becoming more popular in these countries.

IX. Top Stock Pick 7: NVIDIA Corporation (NVDA)

NVIDIA Corporation (NVDA), founded in 1993, is a leading technology company that specializes in graphics processing units (GPUs) for the gaming and professional markets, as well as system-on-chip units for mobile and automotive markets. With a market capitalization of over $500 billion as of 2021, NVIDIA is a key player in the tech industry.

Overview of NVIDIA’s Business and Recent Performance: NVIDIA has seen remarkable success in recent years, driven by its dominance in the graphics processing market for gaming and artificial intelligence (AI) applications. Its GPUs are used not only for enhancing the visual experience in high-performance gaming but also for powering AI workloads, machine learning, and deep learning algorithms. The company’s revenue has grown consistently over the past few years, with gaming and professional visualization segments contributing significantly to its top line. NVIDIA reported record-breaking revenues of $5.01 billion in Q1 FY2021, representing a 43% year-over-year increase.

Analysis by Morningstar Equity Analyst Abhinav Davuluri:

According to Abhinav Davuluri, a senior equity analyst at Morningstar, NVIDIA is a top pick for the new decade due to its competitive advantage in the gaming and AI markets. With the increasing popularity of cloud gaming services like Google Stadia, Amazon Luna, and Microsoft xCloud, NVIDIA’s technology is expected to play a crucial role. Davuluri also emphasizes the company’s potential to disrupt other industries through its AI capabilities, such as autonomous vehicles and data centers. He believes that NVIDIA could be a significant beneficiary of these trends due to the company’s expertise in developing high-performance GPUs.

Discussion of Potential Risks and Challenges:

Despite its strong position, NVIDIA faces several challenges that could impact its growth trajectory. One of the primary risks is increased competition from AMD and Intel in the GPU market. Additionally, regulatory scrutiny on mergers and acquisitions in the tech industry could slow down NVIDIA’s plans to expand its portfolio through strategic deals. Moreover, the ongoing semiconductor shortage and supply chain disruptions could impact the company’s production capacity.

Opportunities for Growth:

However, NVIDIA also has several growth opportunities that could offset these risks. The company is expanding its presence in the data center market with its A100 GPUs, which are designed for AI training and virtualization. NVIDIA’s entry into the automotive market through the acquisition of Israeli autonomous driving startup, MobilEye, is another promising opportunity. The company’s OEM partnerships and investments in R&D could help it maintain its competitive edge and capitalize on emerging trends.

X. Top Stock Pick: Tesla, Inc. (TSLA)

Overview of Tesla’s Business and Recent Performance

Tesla, Inc. (TSLA) is a leading player in the electric vehicle (EV) market with a mission to “accelerate the world’s transition to sustainable energy.” The company designs, manufactures, and sells EVs, solar energy products, and renewable energy storage solutions. Tesla’s recent performance has been impressive, with the stock price more than doubling in 2019 alone. In Q3 2019, Tesla delivered over 75,000 vehicles, setting a new quarterly record. Additionally, Tesla’s energy business continues to grow, with over 1 GWh of energy storage capacity deployed or under development.

Analysis by Morningstar Equity Analyst Dan Galves

According to Morningstar equity analyst Dan Galves, Tesla is a top pick for the new decade due to its competitive advantage in electric vehicles and potential to disrupt various industries, including energy and transportation. Tesla’s EVs offer superior performance, safety features, and autonomous capabilities compared to traditional gas-powered vehicles. Moreover, Tesla’s energy business is poised to disrupt the utility industry by providing distributed renewable energy solutions and grid services. Galves believes that Tesla’s total addressable market could reach $1 trillion by 2030, making it an attractive investment opportunity.

Potential Risks and Challenges

However, Tesla is not without risks and challenges. The company’s heavy reliance on Elon Musk’s leadership and vision could be a concern if he were to step down or become less involved in the business. Tesla also faces intense competition from established automakers, such as General Motors and Volkswagen, which are investing heavily in EVs. Additionally, Tesla’s ambitious expansion into solar power and energy storage could result in significant capital expenditures and operating losses in the near term.

Opportunities for Growth

Despite these challenges, Tesla has significant opportunities for growth. The global EV market is expected to grow rapidly in the coming years, driven by increasing environmental concerns and improving technology. Moreover, Tesla’s energy business has the potential to disrupt the utility industry and provide significant revenue opportunities. Galves estimates that Tesla’s energy business could generate over $10 billion in annual revenues by 2030, making it a key growth driver for the company.

XI. Top Stock Pick 9: Alibaba Group Holding Ltd. (BABA)

Overview of Alibaba’s Business and Recent Performance

Alibaba Group is a leading player in China’s digital economy, known primarily for its role as the country’s largest e-commerce platform. The company operates through several segments including Tmall, the business-to-consumer platform, and Taobao Marketplace, the consumer-to-consumer marketplace. In addition to e-commerce, Alibaba has been expanding its presence in areas like

cloud computing

through Alibaba Cloud,

digital media

with Youku Tudou, and

logistics

through Cainiao Network. In the latest quarterly report, Alibaba’s revenue grew by 38% year-over-year to reach $24.2 billion.

Morningstar Equity Analyst Motoko Mori on Why Alibaba is a Top Pick for the New Decade

Motoko Mori, Morningstar’s equity analyst covering Alibaba, believes that the company’s strong position in China’s

growing consumer market

makes it a top pick for the new decade. “China is home to the world’s largest consumer base, and Alibaba is in a prime position to capture that growth,” she explains. Moreover, Mori sees

expansion opportunities globally

, particularly in Southeast Asia and India, where Alibaba’s e-commerce platforms already have a significant presence.

Potential Risks and Challenges Facing Alibaba and Opportunities for Growth

Despite its strong position, Alibaba faces several risks and challenges. The

regulatory environment

in China is constantly evolving, and the company must navigate potential changes to e-commerce regulations. Additionally, competition from local players like JD.com and Pinduoduo is intense. On the other hand, Alibaba’s

opportunities for growth

are vast. The company is investing heavily in new initiatives like its ‘New Retail’ strategy, which aims to integrate online and offline commerce. Furthermore, Alibaba’s global expansion could open up new markets and revenue streams.

X Top Stock Pick 10: Berkshire Hathaway Inc. (BRK.A, BRK.B)

Berkshire Hathaway Inc., led by legendary investor Warren Buffett, is a

diversified holding company

with its principal businesses in property and casualty insurance, freight rail transportation, utilities, energy, and retail and industrial products. The company’s

recent performance

has been exceptional, with Berkshire posting a 20% return for its shareholders in 2019. This remarkable achievement was largely driven by the strong underwriting performance of its insurance subsidiaries and the solid growth of its industrial businesses.

According to

Morningstar equity analyst

Tae Kim, Berkshire Hathaway stands out as a top pick for the new decade due to its

strong financial position

. With a debt-to-equity ratio of only 0.29 and an interest coverage ratio of over 13, the company is financially sound and well-positioned to weather any economic downturns. Moreover, Buffett’s

proven investment acumen

and discipline in capital allocation have led to consistently superior long-term returns.

However, Berkshire Hathaway is not without its risks and challenges. One potential danger lies in the

volatility of its insurance businesses

, which can be influenced by natural disasters and other unforeseen events. Additionally, the company’s significant reliance on the U.S. economy could make it vulnerable to any economic downturns in that region. On the positive side, there are opportunities for

growth

through acquisitions and expansion into new markets. With Buffett at the helm, Berkshire Hathaway remains a formidable investment for those seeking long-term value creation.

XI Conclusion

As we come to the end of our exploration into the top 10 stock picks for the new decade, it’s important to recap why each company has been identified as a strong contender in the ever-evolving market landscape.

Alphabet (GOOGL)

Alphabet, the parent company of Google, is positioned to capitalize on the growing digital economy with its diverse suite of products and services.

Microsoft (MSFT)

Microsoft, led by its cloud computing division, Azure, and a renewed focus on innovation, is well-equipped to tackle the challenges of the new decade.

Amazon (AMZN)

Amazon, the e-commerce behemoth, continues to expand its reach with new ventures in healthcare and advertising.

Apple (AAPL)

Apple‘s dominant market position, innovative products, and strong brand loyalty make it a solid choice for the new decade.

5. Facebook (FB)

Facebook‘s massive user base and continued growth in advertising revenue make it an attractive investment.

6. Tesla (TSLA)

Tesla, the electric vehicle pioneer, is poised to disrupt the automotive industry with its innovative technology and ambitious expansion plans.

7. Visa (V)

Visa, the world’s largest credit card company, benefits from the growing trend of contactless payments and e-commerce.

8. Mastercard (MA)

Mastercard, similar to Visa, stands to gain from the shift towards digital payments and e-commerce.

9. Nvidia (NVDA)

Nvidia, the leader in graphics processing units, is well-positioned to capitalize on the growth of AI and gaming markets.

10. Advanced Micro Devices (AMD)

Advanced Micro Devices, a competitor to Nvidia, also stands to benefit from the demand for powerful processors in gaming, data centers, and AI. However, it is crucial to remember that these stock picks are not guaranteed to provide positive returns. All investments carry risk and uncertainty.

Disclaimer

Investing in the stock market always involves risk, and it’s essential to consult with a financial professional before making any investment decisions based on this information. Stay informed about these companies and Morningstar’s ongoing coverage of them as market conditions change.

Final Thoughts

Long-term investment perspective and diligent research are key components of achieving financial success in the new decade. By focusing on companies with strong fundamentals, a solid business model, and a competitive edge, investors can navigate the market volatility and emerge victorious.