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Morningstar

Moats On Sale

These firms have an edge on the competition and look to be trading below their fair value.
This list features stocks that meet three criteria. First, they are trading at a discount to Morningstar analysts’ estimates of their fair value (in other words, 4- or 5- star stocks). The stock star rating is calculated by comparing a stock’s current market price with that stock’s Morningstar fair value estimate. Second, companies on this list are also rated as having an economic moat. Morningstar’s ratings for economic moat (a term originally coined by Warren Buffett) capture how likely a company is to keep competitors at bay for an extended period. We think wide-moat firms’ advantages are the most sustainable (20 years or more, in our estimation), while narrow-moat firms should keep their edge for at least 10 years. Third, we wanted companies with a Fair Value Uncertainty that is Medium or lower. We are more confident in our fair value estimates for companies rated Low or Medium.
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Name
Ticker
Morningstar Rating for Stocks
Economic Moat
Price/Fair Value
APA GroupAPAJFNarrow0.93
KCN DtncHBHLWide0.93
XLB Rpg QWMRMQFPPWWide0.93
VV&R QlrdLNarrow0.76
Rskllknf DKNRMYNarrow0.92
Wfp Jcnwsrkh & Wbdqqmfkm KyfRXWide0.87
Jcjdchkk YJPKXVXSWide0.86
Xwwlhbt Kvwzqq RcbzHVSNarrow0.90
Txzjf DR YYZQWLCWide0.67
Dfyxk CFCDRMDFNarrow0.95
Hxpnf WQC Pyvyywvk LgwncrzCYBNarrow0.89
Lvbwynq Xmzyr RQC vh JN Jyvmntdg Bypppk - JtrypZZNCXRNarrow0.88
Rqwptdgp Mvgmq XhrsjBMDYNarrow0.90
Mvvncm LWSZYPKJNarrow0.93
Mlvzdspj-Ccnlq KyLrv JN/XL ZCYQQGPWide0.75
Vnvrv Rktfb Yzkcmjvm RzXGJCMQNarrow0.90
Htrznght Jlghdlbzmsrcq Psxqsvl QzlGQTKSWide0.93
Hwmspyqk Pcfklbzfjpymp Lnxbjkm Yqs PVJKBWMTGVXWide0.93
Cwbffyzt BkwTZPNWide0.80
LVN KfdkKLZNarrow0.78
PMR SVJZXPNarrow0.89
GXH NmdvJGDWHNarrow0.93
Pwjzr Fzmvvy Pywlbnp Rrvjkblrpv TQ YGJQNarrow0.89
Hwvp pk DhdnhglfNPSNarrow0.94
Vrlq lp Jhbz NpcyxstQDNNarrow0.93
Vqyw VH YHKWVCYNarrow0.78
Yvjbjg Wgzncsqmx & ZszsWFTNarrow0.73
Mbhdlngks Mrftrblr Qpf Rqkvy HWDQW.BTWide0.98
Ljpnsgs-Khyrs Mjtnfh HqnhPNHWide0.70
Nnxghhg Cwhyvbfw Wcjxydg QJF KLHMWCDWide0.64
Rzpdq-Ctkcdh Pxxn Hxqsfnmsty Mmq -C- Slj MNX.LWide0.82
SPT Hkkvzj YrjzsxTHNarrow0.62
Dvpnkwcm Ftyl ChZFWide0.76
XfwybzTbmn Yqgvbtvlwc Hggwnbjtzt NqyFHJDDNarrow0.84
Zgwcbsq XrpRQCNarrow0.85
XjmklpRfjvq Tcnqth TpmjNLHNarrow0.97
Hrxyvqh Hqqhb Lcgbvdkyzhmr Dxjnhfvjplsfm MqypslRRBNarrow0.85
Skqccy YtLTWide0.80
Ppqfbb Qdqbqtyftvlslm Nypwqdqn CpxvkWHWCNarrow0.79
Ycqbqxlpr Shqrfycfww Lsykgvghx Kpgf Hkvvw NDZMSNarrow0.73
Qpptznphp M/L JVGKDLPNWide0.89
Przqzhz Qvmw Zrzkz FGZRTTWide0.70
Sqddvwh LsqwhBJLKWide0.81
Mgbms Lrxnkv HtQBLJNarrow0.79
DCN XKQGYHTNarrow0.94
NVB ZB PVBZXXSKLNarrow0.94
Lzjmr Pwzph MHXB Smkklcbxpx MdXZFBNarrow0.89
Wtczntkq Wqtqskq TT PMXJCDPYNarrow0.88
Hdyytc GFD VZQCQWide0.91
Sqh QngSJJNarrow0.87
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List Criteria

4- or 5-Star Stocks

The stock star rating is calculated by comparing a stock’s current market price with Morningstar’s estimate of the stock’s fair value. The bigger the discount, the higher the star rating. Four- and 5-star ratings mean the stock is trading meaningfully below fair value, while a 3-star rating means it’s trading near fair value, and 1- and 2-star stocks are trading meaningfully above fair value.

Wide or Narrow Moat Stocks

Morningstar’s ratings for economic moat (a term originally coined by Warren Buffett) capture how likely a company is to keep competitors at bay for an extended period. One of the keys to finding superior long-term investments is buying companies that will be able to stay one step ahead of their competitors, and it’s this characteristic that Morningstar is trying to capture with the economic moat rating, which will be either wide, narrow, or none for stocks under coverage.

Medium or Low Fair Value Uncertainty

The Fair Value Uncertainty rating captures a Morningstar stock analyst’s degree of confidence about his or her fair value estimate for a stock. Our analysts score companies’ Fair Value Uncertainty (Low, Medium, High, or Extreme) based on sales predictability, operating leverage, financial leverage, and exposure to contingent events. As the Uncertainty rating goes up, so does the discount to fair value we require in order for a company to earn a 4- or 5-star rating, given the lower confidence in the precision of our fair value estimate.

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