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The Best Innovative Companies to Own

These European companies and their stocks are expected to benefit from disruptive technologies.

Illustration with sector and graphical icons.

At the juncture of high quality stocks and frontier technology, several opportunities exist in European equity markets.

The Morningstar Exponential Technologies Index holds around 250 stocks that Morningstar analysts expect to experience significant economic benefits from using or producing a new technology. The companies covered in this index touch on any combination of seven themes: artificial intelligence, cybersecurity and defense technology, energy innovation, financial technology innovation, healthcare innovation, next-generation transportation, and robotics.

But investing in such disruptive innovation can be tricky, according to Dave Sekera, Morningstar’s chief US market strategist. “Because disruptive technology is such a broad, wide-reaching concept, it is difficult to identify companies that fall within the group,” he says.

Which of these companies, representing the index’s seven emerging themes, have the competitive advantages and management teams to thrive?

Here are the 11 companies in the Morningstar Exponential Technologies Index that made our Best Companies to Own list for 2026.

Best Innovative Companies to Buy

Here’s a little but more about each of the best innovative companies to own, including commentary from the Morningstar analyst who covers the stock.

AstraZeneca AZN

AstraZeneca has built its leading presence in the pharma and biotech industry on patent-protected drugs and a developing pipeline that support a wide moat. The strong replenishment of new drugs sets up solid long-term growth.

Astra’s pipeline is emerging as one of the strongest in the drug group, and we think the company is developing several key products that hold blockbuster potential. In particular, the company’s launched cancer drugs Tagrisso, Imfinzi, Lynparza, and Calquence are well positioned based on leading efficacy in hard-to-treat cancers. These drugs also carry strong pricing power to support higher margin sales. Astra is well positioned in the respiratory and diabetes spaces too, although these areas tend to have poor pricing power relative to cancer drugs.

Jay Lee, Morningstar senior analyst

BAE Systems BA.

Escalating geopolitical tensions are driving a multidecade rearmament cycle. After decades of underspending, Europe is rebuilding sovereign capacity in air, land, naval, and missile ecosystems. BAE Systems sits at the center of this shift through incumbency on multidecade programs.

The UK, along with most NATO countries, is committed to increasing defense spending to 3.5% of gross domestic product by 2035. In Europe, BAE holds leading positions in five of the seven priority capability areas, from the Eurofighter Typhoon jet—core to European air defense and with potential to at least double production—to Hägglunds and Bofors combat vehicles, where capacity expansion is underway and embeds BAE deeply into European ground force modernization and logistics resilience, with strong mid-2030s visibility. Moreover, MBDA, in which BAE holds a 37.5% share, has a EUR 39 billion backlog and is scaling to meet European stockpile rebuilding and modernization requirements.

Loredana Muharremi, Morningstar analyst

GSK GSK

As one of the largest pharmaceutical and vaccine companies, GSK has used its vast resources to create the next generation of healthcare treatments. The company’s innovative new product lineup and expansive list of patent-protected drugs create a wide economic moat, in our opinion.

The magnitude of GSK’s reach is evidenced by a product portfolio that spans several therapeutic classes. The diverse platform insulates the company from problems with any single product. Additionally, the company has developed next-generation drugs in respiratory and HIV areas that should help mitigate both branded and generic competition. We expect GSK to be a major competitor in respiratory, HIV, and vaccines over the next decade.

Jay Lee, Morningstar senior analyst

HENSOLDT HAG

Hensoldt is a defense-focused electronics firm, structurally positioned in radar, electronic warfare, optronics, and multidomain integration—segments that are among the fastest-growing in European defense. NATO members have committed to spending 3.5% of gross domestic product on core defense, while Germany has accelerated defense procurement. Europe is closing urgent capability gaps across aircraft, land vehicles, and naval fleets through electronics and sensor upgrades, supporting Hensoldt’s midterm growth. Future programs will embed an even larger share of electronics and software, increasing the firm’s long-term strategic relevance.

Germany remains Hensoldt’s core market, accounting for two-thirds of 2025 revenue, with around one-quarter generated from other EU/NATO countries and the remainder from international markets. Germany’s pledge to lift defense spending to 3.5% of GDP by 2029 makes radar, electronic warfare, and digital sovereignty central procurement priorities, directly benefiting Hensoldt. The firm also benefits from “buy European” policies and sovereign designation, reinforced by partnerships with Airbus, MBDA, KNDS, Leonardo, Indra, Thales, Safran, Rheinmetall, Diehl, and Rohde & Schwarz.

Loredana Muharremi, Morningstar analyst

Kongsberg Gruppen KOG

Kongsberg Gruppen has completed the spinoff of Kongsberg Maritime, creating a pure-play defense and technology company. The separation removes civil maritime exposure and sharpens strategic focus on defense, discovery, and digital, aligning capital allocation and growth priorities with structurally stronger end markets.

The group is now fully positioned to benefit from rising global defense spending, presenting long-term opportunities for Kongsberg in key segments, including its missiles (naval strike missiles, joint strike missiles), air defense (NASAMS), remote weapons, and expanding underwater technologies for subsea surveillance and infrastructure protection. These segments offer high visibility, long program lifecycles, and increasing aftermarket content, supporting maintained revenue growth and margin expansion.

Loredana Muharremi, Morningstar analyst

Novartis NOVN

With strong positions in its core focus therapeutic areas of oncology, immunology, neuroscience, and cardiovascular, renal, and metabolic, Novartis is well positioned for steady long-term cash flows. Strong intellectual property supporting multibillion-dollar products, combined with an abundance of late-stage pipeline products, creates a wide economic moat. While patent losses on cardiology drug Entresto will weigh on near-term growth, a strong portfolio of newly launched drugs and a robust pipeline should ensure a steady long-term outlook.

Novartis concentrates its innovative engine and acquisition firepower in its core focus areas where it has a high level of expertise. It sells a large number of blockbusters, including Entresto, Leqvio (high cholesterol), Cosentyx (immunology), Kesimpta (multiple sclerosis), and Kisqali (oncology), which each have multi-billion-dollar annual revenue. It has also recently launched a number of other drugs with high commercial potential, including oncology drugs Pluvicto (prostate cancer) and Scemblix (chronic myeloid leukemia) and rare-disease and nephrology drug Fabhalta (paroxysmal nocturnal hemoglobinuria, IgA nephropathy).

Despite looming declines in sales for Entresto and oncology drugs Tasigna and Promacta/Revolade, we think the company’s diverse growth drivers and pipeline will more than offset these. One area where Novartis has been particularly outstanding is its acquisition and development of new modalities, which have resulted in several blockbuster treatments, including its radioligand therapies (Pluvicto and Lutathera) for cancer, Zolgensma for spinal muscular atrophy, and Leqvio for high cholesterol.

Jay Lee, Morningstar senior analyst

Rheinmetall RHM

Rheinmetall has a well-diversified portfolio across geographies and platforms, with 80% of its revenue from its defense business and 20% from its civil one. Escalating global security concerns are driving higher growth in the defense market as many countries in Europe have underspent since the Cold War ended. Given the latest developments, including talks about a potential US pullback and increasing pressure from the US for Europe to boost defense budgets, we expect European defense spending to reach 3.1% of gross domestic product by 2029, up from 2.4%, and to reach 3.5% by 2032 (2.8% previously). This situation offers a significant opportunity for Rheinmetall to benefit from its well-diversified geographical presence and product portfolio.

As Germany’s top defense contractor, Rheinmetall stands to gain from Germany’s major shift in defense spending, with Parliament approving a proposal to exempt defense spending above 1% of GDP from debt limits, effectively removing any cap on future military budgets.

We expect Germany’s defense spending to reach 3.5% by 2029-30, averaging 3% in the midterm.

Loredana Muharremi, Morningstar analyst

Roche ROP

We think Roche’s drug portfolio and industry-leading diagnostics conspire to create maintainable competitive advantages. As the market leader in both biotech and diagnostics, this Swiss healthcare giant is in a unique position to guide global health care into a safer, more personalized, and more cost-effective endeavor. Strong information sharing continues between Genentech and Roche researchers, boosting research and development productivity and personalized medicine offerings that take advantage of Roche’s diagnostic expertise and artificial intelligence leadership.

Roche’s biologics focus and innovative pipeline are key to the firm’s ability to maintain its wide moat and continue to achieve growth as current blockbusters face competition.

Roche’s diagnostics business is also strong. With a 20% share of the global in vitro diagnostics market, Roche holds the number-one rank in this industry over competitors Siemens, Abbott, and Ortho. Pricing pressure has been intense in the diabetes-care market, but new instruments and immunoassays have buoyed the core professional diagnostics segment.

Karen Andersen, Morningstar director

Saab SAAB B

With approximately 95% of its revenue from the defense sector, Saab is well positioned to capitalize on the expected increase in European core defense budgets to 3.5% of gross domestic product. This increase, coupled with EU initiatives to enhance defense capabilities through resource pooling and procurement coordination, presents significant growth opportunities for the company. Saab should realize increased demand for its support weapons, sensor systems, airborne early warning, and surface radar systems, with expectations for further growth as European nations replenish their military inventories.

The company’s diversified product portfolio earns 41% of its revenue from Sweden, 25% from the rest of Europe, 10% from North America, 17% from Asia and Australia, and 7% from Latin America and the rest of the world.

Loredana Muharremi, Morningstar analyst

Schneider Electric SU

The majority of Schneider Electric’s revenue comes from the sale of electrical and industrial automation products and systems. Schneider is the undisputed market leader in low-voltage electrical equipment and in several data center product categories. End markets include building, data centers and networks, industry, and infrastructure. The software and services business contributes approximately 20% of group revenue and is targeted to reach 30% by 2030. Several acquisitions have expanded Schneider’s software capabilities, yet the company’s business remains largely dependent on products and systems for growth.

Schneider targets 7% to 10% annualized organic revenue growth through 2030, which is best-in-class in the sector. Our thesis for Schneider to achieve best-in-class top-line growth across the capital goods sector is driven by its favorable exposure to several secular growth themes across its end markets, including artificial intelligence, energy efficiency, and grid modernization. The biggest driver of Schneider’s superior growth outlook is its enviable end-market exposure to data centers, which account for nearly 30% of sales. Its broad portfolio of electrical and liquid-cooling equipment is well positioned to benefit from rising demand from data centers as hyperscalers expand capacity to support AI workloads.

Matthew Donen, Morningstar director

Thales HO

Thales’ business is well diversified, with 45% of revenue coming from civil and 55% from defense. Escalating global security concerns, intensified by the conflict in Ukraine, are driving structurally higher growth in the defense market. We anticipate this growth will be uninterrupted for at least several years, considering that many countries, particularly in Europe, have underspent since the end of the Cold War. Thales is strategically positioned to benefit, given its significant stakes in an array of major international defense projects. With around two-thirds of its defense revenue coming from Europe, Thales remains ideally positioned to benefit from Europe’s structural rearmament cycle, with defense spending expected to increase to an average of 3.5% of gross domestic product by 2035 from 2.1% in 2024.

Loredana Muharremi, Morningstar analyst

Find the full list of Best Companies to Own and read about our selection methodology.

This article was generated with the help of automation and reviewed by Morningstar editors. Learn more about Morningstar's use of automation.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.

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