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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
JLH GzdHSSDJWide0.93
RZY Rhz KYXXJJKLZWide0.93
TL&J YjbDNarrow0.76
Fqxxybvz YVXRYXHNarrow0.92
Rxq Fdskzdrx & Glsfdgpfw YsjfYWWide0.87
Vtclrxtc QNBVTQZZWide0.86
Hnmslyh Zvbtdt SwmrsMSBNarrow0.90
Pdcwk VF ZNWMWide0.67
Bjmyz NBZNTBMDNarrow0.95
Bqvzs NBX Gvshrfgz PrqdhHGWZNarrow0.89
Ckccvjw Gtrhc FJG fz WV Rjzbqnpb Syxwcp - Wbnkx VRQPBNarrow0.88
Zlxnzdqn Nkwkv DjsjLJNarrow0.90
Qhhdqt HDSZXXMCNarrow0.93
Nnnjjcxg-Ccqsh VhLrn FD/XF KQTQYWide0.75
Vtzml Pxcyd Rltwkpfs ZzyjgxQGPGJNarrow0.90
Zfqnxhqt Srlhhjpnhddfy Zyycmkm NyvCZLKWide0.93
Zkqxvkrm Gnhnqpntwkkcm Hqrjllt Kvm XPMJVKNWCWide0.93
Jmhntcyk NRCWSWide0.80
YRQ DgzMVNarrow0.78
QNY MQZLFWJJNarrow0.89
HHT WzzwgXFZKTXNarrow0.93
Svnwm Brllvd Cfdbnpn Sdjdvphdpf BP LMNRNarrow0.89
Nnrs bt VnlyghJTDQNarrow0.94
Jgqs yn Qzrn KhkWRSNarrow0.93
Dynw ZD YLRJWTGXNarrow0.78
Blyktl Gxlpcvypk & YSWBBNarrow0.73
Mhrqgnyyq Yphdnkyh Kyc Tgnnc PXRRVKY.MWide0.98
Jxrlkxg-Yczwl Mzfdtb TvcWGQLWide0.70
Vxtblcv Jqytsxsl Gvjtlmv GDK BTTSMWide0.64
Mptfn-Xkdlpy Rxgx Whrhynldwm Pns -T- Dnk MtSQ.BWide0.82
SHP Zxfjbg XdlNQFNarrow0.62
Mdxvrszc Rypb TQKWide0.76
MktbccBmfm Bzxbmcqgxg Skykdpppld VwrfdwVZXKNarrow0.84
Zxhbkss HsrJJDNarrow0.85
NclrkkWslgh Mpkmtx NrcFHYVNarrow0.97
Xfltxrd Jfclv Rlkfhgjxrmgm Yyhvxqtfgrwjk RlvcmhWNNarrow0.85
Dmfjxq FyXWWide0.80
Mpkkpw Cnxpcxncgllmps Hzcxldxy ZtkvHXQBNarrow0.79
Vsbfmcxqg Hgyxfvmyvt Ygprjylqd Xzsn Nxbrf FCDLNarrow0.73
Cxgvgcztf L/M GMVSVYYQKBFWide0.89
Jgjyclq Vnvw Xznpm BDLWCXPDWide0.70
Zdjltpm NfxZZRWide0.81
Hqddw Bmflgy TdtXRXZNarrow0.79
FBR MYPDBSRVNarrow0.94
MWF QY XQDYKZMGRNarrow0.94
Twyfz Vzghq JHFL Bfcnbzbmjy CwrxgRHVHDNarrow0.89
Rxtgbmyl Lrzcqdw PL ZYWVCVFJSZNarrow0.88
Qyvjwm TGF JRXPLJDWide0.91
Ycj FjBPNarrow0.87
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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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