10 Top Stock Picks of the Best Fund Managers

We then filtered this list to include only funds with a Morningstar Medalist Rating of Gold and those with 100 stocks or fewer as of their most-recently-reported portfolios.

Fourteen separate fund portfolios passed our screening. We then aggregated the portfolios to find the 10 most-popular stocks (as determined by portfolio concentration and number of funds that own the stock) across all 14 fund portfolios. 

10 Top Stock Picks of the Best Fund Managers 

These are the most popular stocks chosen by top fund managers, according to their most recent portfolio updates. All Morningstar data included in this piece is as of August 19 2024. 

This list ranges from stocks that are undervalued, fairly valued or overvalued today. 

1. Heineken (HEIA)
2. Microsoft (MSFT)
3. Novo Nordisk (NVO)
4. LVMH (MC)
5. Alphabet (GOOGL)
6. Diageo (DGE)
7. Roche (ROG)
8. Visa (V)
9. ASML (ASML)
10. Apple PLC (AAPL) 

Here's what you need to know about each stock, along with some commentary from the Morningstar analyst that covers it.

Heineken

• Number of best managers who own the stock: 8
• Price/Fair Value: 0.8 
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Medium 
• Morningstar Fair Value Estimate: £85.14 
• Sector: Consumer Defensive
• Morningstar Rating: ★★★★

Heineken sold 243 million hectoliters of beer in 2023, and is the world's second-largest brewer behind Anheuser-Busch InBev. It has the leading position in many European markets, including the Netherlands, Austria, Greece, and Italy.  

Its eponymous flagship brand, Heineken, is the world's leading international premium lager by volume and has spawned several extensions including Heineken 0.0 and Heineken Silver.

Verushka Shetty, equity analyst at Morningstar, says this of the global beer brand.

"After a period of industry consolidation, we think the future of the brewing industry lies in premiumisation at scale, nonalcoholic beer, and portfolio proliferation.  

We believe Heineken has strategies to deliver against all of these themes. The company's approach to value creation is its 'green diamond,' which focuses on four metrics: growth, profitability, capital efficiency, and sustainability and responsibility, and its five strategic priorities under the 'EverGreen' umbrella are: shape the future of beer and beyond, digital, productivity, sustainability, and people. 

Growth targets under EverGreen are vague, but we think Heineken has structural growth drivers that will allow it to generate above-average net revenue growth. Volume growth in early-stage emerging markets such as central and Southern Africa, premiumisation in its late-stage developing markets such as Brazil, and a very strong start in nonalcoholic beer through Heineken 0.0 and in cider, should combine to drive mid-single-digit growth in the medium term.  

However, productivity targets are much more explicit. Heineken generated €2 billion in efficiencies by the end of 2023, relative to its 2019 cost base, primarily from reducing headcount and expects a further €400 million in annual savings from 2024. Inflation derailed the company's attempt to reach a 17% EBIT margin in 2023, but in a normalised environment, we think this will be achievable and we see 18% as a reasonable medium-term margin expectation. 

However, to achieve this Heineken will have to rebuild its gross margin, which has faded from a consistent level slightly above 60% a decade ago to just 56% in 2022, and 54% in 2023, affected by severe cost inflation.  

A reversal in the spike in raw material costs will help, but we expect higher marketing expenses to drive scale in some of Heineken's premium and nonalcoholic brands, which will dampen the margin impact of cost deflation. 

Therefore, execution around digitalisation, optimising the competitive advantage of scale, production efficiency, and growth in high-margin premium categories will be critical to delivering the medium-term value creation potential of the business."

Read Morningstar's full report on Heineken

Microsoft 

• Number of best managers who own the stock: 7 
• Price/Fair Value: 0.85
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium
• Morningstar Fair Value Estimate: £378.03
• Sector: Technology
• Morningstar Rating: ★★★★

Microsoft develops and licenses consumer and enterprise software and is best known for its Windows operating systems and Office productivity suite. Morningstar considers Microsoft to be undervalued.  

It is currently trading at $421.22 (£324.03), below Morningstar's Fair Value Estimate of £378.03. Here is what Morningstar senior equity analyst Dan Romanoff said after the company's most recent earnings.

"We [have raised] our Fair Value Estimate for Wide-Moat Microsoft to $490 per share, from $435, after the company delivered another good quarter overall, even if it was in line with our expectations on headline numbers.  

In an earnings call packed with new data points around artificial intelligence-related demand, which were impressive, in our view, the single most important item was guidance that calls for Azure revenue to accelerate in the second half of the year as the current surging investment in data center capacity comes online.  

Therefore, we raised our revenue growth estimates for the medium term, and we also tweaked our profitability assumptions higher based on consistently good performance and a solid outlook. Revenue was again governed by data center capacity constraints and several pockets of slight weakness arising in Europe. With shares down slightly after hours following a recent pullback, we see the stock as attractive. 

We see results reinforcing our long-term thesis, which centers on the proliferation of hybrid cloud environments and Azure. The firm continues to use its on-premises dominance to allow clients to move to the cloud at their own pace. We center our growth assumptions around Azure, Microsoft 365 E5 migration, and traction with the Power Platform for long-term value creation. AI is also quickly supplementing growth, which we see as another secular driver. 

For the June quarter, revenue increased 15% year over year to $64.73 billion, compared with the midpoint of guidance of $64.00 billion. Activision added about $1.68 billion, or 3 points of growth, to revenue. Relative to the year-ago period, productivity and business processes rose 11%, intelligent cloud increased 19%, and more personal computing expanded 14%.

Compared with guidance, both PBP and MPC came in above the high end, while IC was just below the midpoint. Good sales execution and sales mix toward software, away from hardware, supported margins."

Read Morningstar's full report on Microsoft

Novo Nordisk

• Number of best managers who own the stock: 7
• Price/Fair Value: 1.57
• Morningstar Economic Moat Rating: Wide 
• Morningstar Uncertainty Rating: High
• Morningstar Fair Value Estimate: £66.16
• Sector: Healthcare
• Morningstar Rating: ★ 

With roughly one third of the global branded diabetes treatment market, Denmark's Novo Nordisk is the leading provider of diabetes treatment products in the world.

Morningstar believes the stock is worth £66.35, making it overvalued at its current share price of £104.07.  

Karen Andersen, senior analyst in biotechnology at Morningstar, held Morningstar's Fair Value Estimate for Novo Nordisk following the firm's second-quarter results.  

"We're maintaining our DKK 600/$86 (£66.16) Fair Value Estimates for Novo Nordisk following second-quarter results that were slightly below our very high expectations, but not enough to significantly sway our full-year expectations. 

In the first half of 2024, Novo Nordisk's revenue grew 25% at constant currencies, with 32% GLP-1 diabetes growth (largely Ozempic) and 37% GLP-1 obesity growth (Wegovy). Management slightly raised its expected 2024 sales growth by 2 percentage points at the midpoint to 22%-28% at constant exchange rates (from a prior range of 19%-27%).  

Excluding an impairment related to a failed trial of cardiovascular drug ocedurenone, management's 2024 operating profit growth expectations increased by roughly 4 percentage points, and we think the firm looks on track to produce solid double-digit performance in line with the midpoint of guidance in the second half. 

We still think Novo's GLP-1 business across therapeutic areas will peak above $70 billion in 2031, although we remain less confident in its ability to grow beyond the 2032 patent expiration for semaglutide, the molecule in Ozempic and Wegovy.  

While we continue to see Novo Nordisk as a Wide-Moat firm, with strong intangible assets surrounding its cardiometabolic business, we think high obesity drug demand and supply constraints have pushed shares above their intrinsic value.  

In our obesity forecast, we're weighing the upside from potentially positive data later this year for monlunabant and CagriSema against downside from poor compliance rates and increased competition on the horizon. 

In 2025, semaglutide data in Alzheimer's stands out as a wild card, but potential Medicare negotiation beginning in 2027 could make it more difficult to realise significant sales in this indication. We were disappointed in the delay for once-weekly insulin Awiqli in the US, with a refiling now expected in 2025, although we still think this product and a semaglutide combination could support diabetes sales."

Read Morningstar's full report about Novo Nordisk

LVMH

• Number of best managers who own the stock: 7
• Price/Fair Value: 1.01
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium
• Morningstar Fair Value Estimate: £553.43 
• Sector: Consumer Cyclical
• Morningstar Rating: ★★★

LVMH is a global producer and distributor of luxury goods. It operates in six segments including fashion and leather goods. Its most famous brands include Louis Vuitton, Bulgari, Fendi, Givenchy, Tag Heuer, Hennessy, Moet & Chandon, Glenmorangie, Sephora, and Benefit. It operates more than 5,000 stores around the globe. 

The stock is currently trading at €677.10 (£577.35) just above Morningstar's Fair Value Estimate for the business at €650.  

Jelena Sokolova, senior equity analyst at Morningstar, recently reduced her Fair Value Estimate for LVMH due to slower expectations for 2024 sales. 

"After losing around a fifth of their value over the course of last year, LVMH shares trade approximately in line with our Fair Value Estimates. We are confident in our Wide Moat Rating for the stock and its resilience through industry slowdown. The luxury industry is cyclical, but downturns historically haven't lasted longer than one to two years. 

LVMH's sales in the second quarter were lackluster, with 1% constant-currency growth – though better than weaker peers, like Burberry and Swatch, and in line with Richemont. Sales growth for the most profitable division, fashion and leather, also came in at 1%.  

Margins came under pressure for most segments, apart from the selective retailing segment. The drivers were higher general and administrative spending to support higher postpandemic revenue that came with a lag; and a sales shift to Japan (up 44% in the first half) where the currency is weak and store costs are to a larger degree variable compared with the rest of the Asia-Pacific.  

For the group, the margin was 25.6% versus 27.4% in the prior year. Regionally, US and Europe sales were up in the low single digits, with slightly better trends in the second quarter. Asia excluding Japan sales were weak, falling 14% in the quarter as Chinese consumption shifted to Japan to take advantage of currency weakness.

Overall sales to Chinese consumers globally were up in the high single digits in the first half, with a slight deceleration in the second quarter for the fashion and leather division. Sales at the watches and jewelry division faltered – down 4% for the quarter – due to Tiffany's poor performance, being affected by listless bridal demand and sluggish aspirational consumer demand in the US, and sales decline among Chinese consumers."

Read Morningstar's Full Report on LVMH

Alphabet

• Number of best managers who own the stock: 5
• Price/Fair Value: 0.9
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High
• Morningstar Fair Value Estimate: $182.00
• Sector: Communication Services
• Morningstar Rating: ★★★

Alphabet is a holding company, and the internet media giant Google is a wholly owned subsidiary. Google services account for nearly 90% of Alphabet's revenue, of which more than 85% is from online ads.

Other Google services revenue is from sales of apps and content on Google Play and YouTube, as well as sales of hardware such as Chromebooks, the Pixel smartphone, and smart home products, which include Nest and Google Home. 

Alphabet is trading at $168.40, below our Fair Value Estimate of the stock at $182.00 (£140.41).  

Morningstar director of equity research Michael Hodel says this of the company's health:

"Alphabet dominates the online search market with 90%-plus global share (80%-plus US share) for Google, and the business generates very strong cash flow. We expect continuing search growth as we remain confident that Google will maintain its leadership despite Microsoft's move to include generative artificial intelligence in Bing and Google's recent AI missteps. 

We also foresee YouTube and cloud contributing more to the firm's top and bottom lines. Google's ecosystem strengthens as its products are adopted by more users, making its online advertising services more attractive to advertisers and publishers. With its dominant share of queries globally, Google holds and continues to collect far more information regarding consumer behavior, in terms of both which results are most relevant for a given search term and the ads most likely to generate incremental sales. 

The firm uses technological innovation to improve the user experience in nearly all its Google offerings, while making the sale and purchase of ads efficient for publishers and advertisers. This innovation has included the use of AI in delivering search results.  

The introduction of generative AI adds some uncertainty, but we expect Google will ultimately use its information advantage to maintain its dominance. While the business is maturing, we think ad revenue can continue to grow at mid-single-digit rates in the coming years. 

Among the firm's investment areas, Google has quickly leveraged the technological expertise applied to its private cloud platform to expand into the public cloud business. The firm has increased its market share in this area, driving additional revenue growth and creating more operating leverage, which we expect will continue. 

Most of Alphabet's more futuristic projects are not yet generating revenue, but the upside is attractive if they succeed, as the firm is targeting newer markets. Alphabet's autonomous car technology business, Waymo, is a good example: based on various studies, it may tap into a market valued in the tens of billions of dollars within the next 10-15 years."

Read Morningstar's Full Report on Alphabet

Diageo 

• Number of best managers who own the stock: 5 
• Price/Fair Value: 0.8 
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Low 
• Morningstar Fair Value Estimate: £31.00
• Sector: Consumer Defensive
• Morningstar Rating: ★★★★★

Diageo is one of the world's leading producers of branded premium spirits, but it also produces and markets beer and wine. Brands include Johnnie Walker blended scotch, Smirnoff vodka, Crown Royal Canadian whiskey, Captain Morgan rum, Casamigos tequila, Tanqueray gin, Baileys Irish Cream, and Guinness stout. 

Diageo is trading at £24.83, below Morningstar's Fair Value Estimate of £31.  

Here is what Verushka Shetty, associate equity analyst at Morningstar, writes about the multinational drinks brand.

"Diageo was created in 1997 following the merger of Grand Metropolitan and Guinness. Mergers and acquisitions remain part of the firm's DNA, and subsequent transactions – some transformative, others bolt-on – have established Diageo as a global industry leader.  

Although the industry is fairly concentrated (we estimate a four-firm concentration ratio of 0.6, above many other fast-moving consumer goods categories, including the global brewing industry at 0.5), we believe there is more consolidation to come. Outside the top five firms, the industry is highly fragmented, and regional players often dominate in niche product categories or local markets.  

These firms present a new wave of merger opportunities for the industry consolidators, including Diageo, to grow their developing markets footprint. Another reason for Diageo to continue consolidating is to broaden its product portfolio, an important strategy in the on-trade. Volume in the spirits industry is more cyclical than beer, and with fairly transient trends.  

For example, the current shift away from white spirits (mainly vodka) to brown spirits is a reversal of the 1990s trend. Diageo's broad presence across categories with both global strategic and local niche brands mitigates some of the risk to volume from such shifting consumer preferences. 

Diageo is undertaking a premiumisation strategy, which we think will be a long-term tailwind to both volumes and price/mix, despite the reversal of that trend during the ongoing slowdown in consumer spending. In mature markets, spirits have been taking share from beer and wine as consumers trade up.

In the United States, for example, the spirits category has added an average of around 20 basis points of share from other categories every year for the past decade; a continuation of that trend could support Diageo's volume in developed markets, despite an underlying headwind of falling alcohol consumption.

With regard to price/mix, the way Diageo has laddered the pricing structure of brands such as Johnnie Walker demonstrates that there is vast scope for "premiumising" some of the core brands in the portfolio, a luxury most consumer staple companies do not share." 

Read Morningstar's full report of Diageo

Roche

• Number of best managers who own the stock: 5
• Price/Fair Value: 0.74
• Morningstar Economic Moat Rating: Wide 
• Morningstar Uncertainty Rating: Low
• Morningstar Fair Value Estimate: CHF 379/$55
• Sector: Healthcare
• Morningstar Rating: ★★★★★

This Swiss biopharmaceutical and diagnostics company's bestselling products include a variety of oncology therapies from acquired partner Genentech, while its diagnostics group was bolstered by the acquisition of Ventana in 2008. 

Roche is currently trading at CHF 282.10 (£252.46) and is, in Morningstar's analysts' view, undervalued.  

Senior analyst in biotechnology, Karen Andersen, has maintained Roche's Fair Value Estimate at CHF 379/$55 because of its strong results in the second quarter.  

"We're maintaining our CHF 379/$55 Fair Value Estimate for Roche's nonvoting shares and ADRs following strong top- and bottom-line growth in the second quarter, as the firm's newer launches and above-market diagnostics growth are finally shining through as covid headwinds fade.  

Foreign exchange headwinds are also fading, and the firm saw 9% constant currency sales growth in the quarter (7% as reported). Management raised guidance for 2024 core EPS growth to high-single-digit from mid-single-digit (at constant currencies), which looks achievable as Roche's cost controls and manufacturing productivity efforts are becoming more apparent in its improving operating margins.  

In pharma, we think Roche has in-licensed a string of promising drug candidates in cardiometabolic settings (Alnylam's zilebesiran and Carmot's CT-388 and CT-996) and in immunology (Televant's TL1A), and additional bolt-on acquisitions could help support the firm's already full late-stage pipeline in oncology and neurology. 

In diagnostics, we think the firm's core business is performing strongly, but we're also looking forward to this year's launch of an automated mass spectroscopy platform as well as midterm potential for a differentiated next-generation sequencing product. We think Roche's drug portfolio and pipeline and leading diagnostics business continue to support a Wide Moat. 

In the pharma division, we were particularly impressed that the launch of ophthalmology drug Vabysmo continues to beat our expectations, despite Regeneron's competing next-generation Eylea (Eylea HD) gaining a key Medicare reimbursement code in April. We think Vabysmo has significant momentum as physicians gain more experience with the drug.  

Roche's recent long-term data for Vabysmo show potentially differentiated long-term effects with similar convenience to Eylea HD, and we now model CHF 7 billion in Vabysmo annual sales by 2033, up significantly from our expectation for more than CHF 3.7 billion in sales in 2024."

Read Morningstar's full report on Roche

Visa

• Number of best managers who own the stock: 4 
• Price/Fair Value: 0.98
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium
• Fair Value Estimate: $272
• Sector: Financial Services
• Morningstar Rating: ★★★

Visa is the largest payment processor in the world, operating in over 200 countries and processing transactions in over 160 currencies. In fiscal 2023, it processed almost $15 trillion in total transactions.

Its systems are capable of processing over 65,000 transactions per second. Visa is currently trading at $266.47, slightly below Morningstar's Fair Value Estimate of $272 (£209.24). Here is what Brett Horn, senior equity analyst at Morningstar, writes about Visa. 

"As Visa has moved past postpandemic tailwinds, we think growth has returned to normal levels, and we see the macro environment as the biggest swing factor in the near term.

While some growth metrics slowed modestly in the fiscal third quarter, we don't think this quarter marks a significant change on this front, and we continue to see the company's path forward as relatively stable. We will maintain our $272 Fair Value Estimate for the Wide-Moat company and see shares as about fairly valued at the moment. 

Net revenue grew 10% year over year. Constant-currency payment volume growth for the quarter was 7.4% year over year. Payment volume growth had been in the range of 8%-9% over the past four quarters. Management attributed the slowdown partially due to some softness among lower-spending consumers. Transactions growth was 10%, in line with results over the past few quarters. 

Cross-border volume has been the main source of volatility over the past few years, with the crash during the pandemic giving way to abnormally high growth more recently as travel recovered. However, we've seen signs that this tailwind is tapering off, and this quarter provided further confirmation of this trend.

Constant-currency cross-border volume, excluding intra-Europe transactions – which are priced similarly to domestic transactions – grew 14% year over year in the quarter, down a bit from 16% in the last quarter. While growth in this area is still healthy in an absolute sense, the recovery in cross-border volume looks to be running out of steam. 

Adjusted for one-time items, operating margins (on a net revenue basis) were 66.9%, compared with 67.5% last year. While expense growth has outstripped revenue growth in the last two quarters, management expects that to reverse in the fiscal fourth quarter. Client incentives grew only 11% year over year, reducing margin pressure on a gross revenue basis."

Read Morningstar's full report on Visa

ASML Holding

• Number of best managers who own the stock: 3
• Price/Fair Value: 0.92
• Morningstar Economic Moat Rating: Wide 
• Morningstar Uncertainty Rating: High 
• Morningstar Fair Value Estimate: €900
• Sector: Technology 
• Morningstar Rating: ★★★

ASML is the leader in the photolithography systems used in the manufacturing of semiconductors, but it actually outsources the manufacturing of most of its parts, performing the role of an assembler in the marketplace. ASML's main clients are TSMC, Samsung, and Intel.

ASML stock is currently undervalued trading at €852.70 (£727.08), below Morningstar's Fair Value Estimate of €900.

Here's what European equity analyst Javier Correonero said about the semiconductor giant. 

"With global stocks declining sharply due to the possibility of a US recession, the decline among semiconductor firms like Wide-Moat ASML and Narrow-Moat Besi has been particularly pronounced. We believe this a rare opportunity to buy shares of two exceptional firms, with competitive advantages and sound operations management.  

ASML and Besi offer a 28% and 20% upside to our €900 and €120 Fair Value Estimates, respectively. In the case of a global recession, we expect both firms will remain profitable through the cycle given their assembly business model, which provides cost flexibility during periods of lower demand. Our 2025 EPS estimates for both companies are more conservative than PitchBook consensus estimates as of early July. 

ASML is now trading at 25 times the 2025 P/E, based on our €28.6 EPS estimate for next year. ASML's backlog remained strong at €39 billion at the end of the second quarter, giving certainty that the company will deliver around the midpoint of its 2025 revenue guidance. Even if 2026 turns out to be a weak year, the long-term trends supporting semiconductors remain strong, with ASML expecting high-single-digit growth over the next decade, in line with our estimates. 

Narrow-Moat Besi is also trading at 25 times our 2025 estimates of €3.90 EPS. Besi can maintain outstanding levels of profitability during market downturns thanks to its highly flexible cost model, Moat, and focus. In the past 10 quarters, Besi has consistently maintained gross margins above 60%, even during periods of double-digit sale declines, even higher than front-end peers ASML or Applied Materials.  

Management expects flat sequential sales growth next quarter and more hybrid bonding orders to come in the second half of 2024, which should result in a healthy order outlook for 2024. We expect a 16% sales compound annual growth rate for Besi's revenue in the next decade, underpinned by hybrid bonding growth."

Read Morningstar's full report on ASML

Apple

• Number of best managers who own the stock: 2
• Price/Fair Value: 1.22
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium 
• Morningstar Fair Value Estimate: $185
• Sector: Technology
• Morningstar Rating: ★★

Apple is among the largest companies in the world, with a broad portfolio of hardware and software products targeted at consumers and businesses. Apple's iPhone makes up a majority of the firm sales, and Apple's other products like Mac, iPad, and Watch are designed around the iPhone as the focal point of an expansive software ecosystem.   

The business is trading at $225.89 (£173.77) above Morningstar's Fair Value Estimate of $185.  

Morningstar equity analyst William Kerwin recently raised Apple's Fair Value Estimate after the company increased its medium-term iPhone revenue forecast for the technology giant.  

"We raised our Fair Value Estimate for shares of Wide-Moat Apple to $185 from $170 after raising our medium-term iPhone revenue forecast. We continue to expect strong revenue growth in fiscal 2025 as users upgrade their iPhones to take advantage of Apple's generative artificial intelligence features, requiring the latest and greatest hardware.  

We now forecast double-digit iPhone revenue growth in fiscal 2025 and another strong year of revenue growth in fiscal 2026. IPhone revenue remains the primary driver of Apple's results. We see it as the linchpin to the firm's walled garden ecosystem of hardware, software, and services, which underpins our Wide Moat rating and long-term growth thesis. However, we continue to see shares as overvalued.  

Apple's current stock price implies closer to 20% iPhone revenue growth in fiscal 2025, which we see as lofty given headwinds to growth in China and slowing consumer phone upgrade cycles. 

Apple's June-quarter revenue and September-quarter guidance were above our model, driven by better performance for the iPhone than we feared. June-quarter revenue of $85.8 billion rose 5% year over year.

iPhone revenue declined 1% year over year, and we believe guidance implies a return to year-over-year iPhone revenue growth in the September quarter. iPhone growth has been hampered in the past several quarters by greater domestic competition in the Chinese market, as well as extending hardware upgrade cycles in other markets. 

We expect generative-AI functionality to drive a return to growth in fiscal 2025. Services continued double-digit year-over-year growth, and we see this as Apple's second-largest driver at roughly 25% of total revenue. 

We remain impressed with Apple's profitability and ability to expand margins. June-quarter gross margin rose 180 basis points year over year to 46.3%. We expect a rising mix of services revenue and higher levels of vertical integration to drive incremental margin expansion over the next five years."

Read Morningstar's full report on Apple