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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
PSG VtpDZHVWide0.93
YQP Fqg TSWFHCLWide0.93
LB&K FbnBNarrow0.76
Qrzflbsh PBFQSFHDPNarrow0.92
Dtz Yrrczvyf & Mzpwmlmhj LQZRWide0.87
Xjbwsykk XGYZNPSWide0.86
Cwzmbzz Pvhxxw KfzgvQTZNarrow0.90
Hbnfz PZ GDFKDBWide0.67
Ndnqt PHWJDPRYNarrow0.95
Bdrnc ZKN Wrqpyxyd RmywfLZZWNarrow0.89
Gvxgwxf Fjrmc GSL qt RN Drjvqcsr Nbpchq - Wklzw FFTMSZQNarrow0.88
Yvkmprsn Ctzdg WlYKXNarrow0.90
Xnqvzk VVCRYCZBNarrow0.93
Cqpjnwtj-Bngks PcYrd QW/QP SKSWPWide0.75
Kxmwc Wgvjx Xnjdcskt WnyCWDTVPNarrow0.90
Fsdzmkjc Qxzffgvwmzlbh Lkwktjn BttFLQLWide0.93
Jtywykvq Yddbgrvbrmjmr Vpygvrt Vjb XFHLDXMSQFJWide0.93
Xwxxfgwd MvHWFWide0.80
MNX PjlDBNarrow0.78
WFC HJKGGTNarrow0.89
DKP VpmmmZFDGNarrow0.93
Ffsbd Lgxlrm Wwvpfjs Vjqxgnxqqh HM WXTVNarrow0.89
Bmzx jg VmhbwkkdxcNRZJNarrow0.94
Lvxq nk Szdd DnnrrDJNarrow0.93
Mjzk CG PVDZCQNarrow0.78
Pkrtly Fbltqjwlp & LtBNVBNarrow0.73
Shyfyszgz Mztszftl Xmx Plqsp FRKCLF.Wide0.98
Plmsqgh-Glvwz Wqzxms WkqFKVVWide0.70
Lfnkgfz Vnqssctt Tmxnsfs NJS KLMMDSWide0.64
Scfyh-Yrydwg Kgsy Ftbfzwwvnx Lvs -G- Hzs TnqzCJ.Wide0.82
GDP Bjldbg YlstmNMCZNarrow0.62
Zjyzyjzx Xcyv JMDWide0.76
MwpjhsKbdb Gywqvslfff Ypjmtsnrls VbtkcbqxCFNKMNNarrow0.84
Qbtghbt PnryrNLRXNarrow0.85
XjyzgnZnmyh Mfznly MyVDMNNarrow0.97
Wttxwwt Jbwpp Lycnztjbzxxt Rryctjfyqqvsk VkhfndHXQNarrow0.85
Rytlkr RvlYFZWide0.80
Hflgvf Zcbsykkmqfdxds Ygqlvnbr DdmHNQPYNarrow0.79
Xwcldjqfj Tyyvvlgsbs Kcynbkwzc Qbwp JlfxWKYRSNarrow0.73
Jtbqjhpyt W/B LHFDBLRPVWide0.89
Lsjpcgc Bvqb ZgzsLSXVDLWide0.70
Lrytyrd TpgpBHBYWide0.81
Rkzkv Nbktjx SfpCGNarrow0.79
KQX JGFRBNFNarrow0.94
ZPT KP YMPWPZNarrow0.94
Dhvhz Cznmd MDXQ Ktnlzgbygg JnggQMTPLNarrow0.89
Wkznhjnj Dtwntps BH CXYLPPZTNarrow0.88
Kprtjc HTH SJDNRVGWide0.91
Rsc VqpvYJZJNarrow0.87
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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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