Best Holding Companies: Cornerstones of Long-Term Investing
When you buy a stock, you actually own a portion of a business. Therefore, understanding the quality of the business you invest in is crucial, just as you would take a test drive before buying a car. Truly outstanding companies can often exceed your expectations, discovering investment opportunities that you might not be able to reach personally, thereby enhancing the intrinsic value of the business. Over time, the value of these companies will far exceed what it is today.
Over the long term, our analysts believe that investing in high-quality companies is far more advantageous than chasing market fluctuations or low-quality companies enjoying temporary prosperity. So, which companies qualify as the "best"?
What Is a "Best Company"?
The key to finding the best long-term investments is to buy high-quality companies that can consistently stay ahead of their competitors. Legendary investor Warren Buffett coined the term "economic moat" to describe a company's ability to withstand competition over the long term. Morningstar builds on this by rating companies based on the strength and durability of their "moats."
Based on our analysts' coverage, we have compiled a list of the best companies for U.S. investors. These companies have successfully built wide moats between themselves and their industry competitors, and we believe that over the next 20 years or more, their returns will exceed their costs. In other words, these are high-quality businesses that can consistently generate steady returns for investors over the long term, even as they continue to invest to drive their own growth.
However, we are not suggesting that you buy every company on the list today. Even the best company can become a bad investment if you pay too high a price. The stock prices of many companies on the list have already exceeded their intrinsic value, so now may not be the right time to buy. But we still believe these companies should be on any stock investor's watchlist.
Best Companies by Sector
Consumer Cyclical Companies
The consumer cyclical sector is highly dependent on economic conditions. These companies typically operate in non-essential consumption areas such as entertainment, dining, and travel, making them more vulnerable to fluctuations in consumer spending. Many consumer cyclical companies benefit from brand equity—when consumers decide to spend, they often choose brands they know and trust.
Consumer Defensive Companies
The consumer defensive sector is not what it sounds like literally. Think of the brands in your home: companies that make household and personal products, food, beverages, and also discount stores. These companies provide services that consumers always need, so economic changes such as recessions have little impact on this sector. That is precisely where "defensive" comes from. Many companies solidify their positions by building strong relationships with shoppers, offering low prices or strong brand premiums.
Financial Services Companies
The financial services industry includes banks, asset management companies, financial research and data companies, credit services, investment brokerages, stock exchanges, and insurance companies. The services they provide vary, and so do their ways of fending off competition. The most common commonality is this: customers face high barriers when switching service providers.Many financial services companies are highly sensitive to interest rates, stock market levels, and the financial health of consumers and businesses.
Healthcare Companies
The healthcare industry is equally defensive, typically remaining stable regardless of the economy. This sector includes companies in biotechnology, diagnostics and research, pharmaceutical manufacturing, and health information services. Many of the high-quality healthcare companies on our list are pharmaceutical manufacturers whose patent protections make it difficult for competitors to enter.
Industrial Companies
Aircraft, trains, and heavy machinery: industrial companies support and transport all industrial products. This sector includes manufacturers of machinery, hand tools, and industrial products, as well as aerospace and defense companies and transportation services. On our list, the industrial sector has the largest number of companies. Many quality industrial companies benefit from their established positions in their respective industries, which enables them to develop brands and patents, creating advantages. Additionally, they often have cost advantages because infrastructure or regulatory constraints in the industry make it difficult for new competitors to enter.
Technology Companies
The technology sector is known for "disruptors," but some companies can still carve out stable niches. Technology companies design, develop, and support computer operating systems and applications, and also include manufacturers of computer equipment, data storage products, networking products, semiconductors, and components. Many of the quality companies on our list are software application developers that maintain their positions by offering services with high switching costs. Customers find it difficult to stop using their services because switching is difficult, expensive, and risky.
Other Industries
The following companies represent different sectors: basic materials, communication services, and energy. Most of these industries fluctuate with the economy, making cash flow forecasting more difficult. Many companies are also in highly competitive or evolving industries, making it hard to build durable competitive advantages.
What Should Investors Focus On?
In the second half of 2026, investors should pay attention to valuation changes in these high-quality companies. Even the best businesses are not a wise buy if purchased at too high a price. We recommend using this list as a watchlist and entering when prices are reasonable.
Selection Criteria
This list is based on stocks covered by Morningstar Research Services equity analysts and traded in the U.S. market. Analysts calculate fair value estimates for companies listed in the U.S. Within this scope, the best companies must meet the following criteria: have a wide moat, predictable cash flows, wise capital allocation, and effectively address environmental, social, and governance (ESG) issues.
It is worth noting that to maintain analyst independence, Morningstar Research Services does not publicly rate its parent company, Morningstar, and therefore Morningstar is not on the list of best companies.
Summary: These companies possess durable competitive advantages and are cornerstones for long-term investors. However, investing requires caution—pay attention to valuations and patiently wait for good prices.