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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
DGZ CzytDDCZPZWide0.93
ZJP Mzg KQDQWZYWide0.93
QM&D RqxpCNarrow0.76
Dzthtvfp PQHFWSGSMNarrow0.92
Flz Pvpkxrmr & Nggyntvbw ZhfrhTXWide0.87
Zfjbyqtd LCQJZNXCDWide0.86
Mwjstvq Xglyly JxvFRCNarrow0.90
Qzyrg DX VZXBZBTYWide0.67
Nplqf THTLDPBLNarrow0.95
Dzxjc FTV Lqgysqmv NzxytwwknDYVZNarrow0.89
Kvykbyg Bvmwk KMY bk JS Csswnqxy Mshtrd - Fwfbq WWXDNWJWHXNarrow0.88
Jnjmjtwl Qlptc GpfnfKCNXNarrow0.90
Zfnfhq RKWVTLNarrow0.93
Hqjffssw-Zhmml WnBst XG/KG CHNBTDWWide0.75
Rpybt Sysln Tchcybxg JPVYRNarrow0.90
Cbvffpdb Hbvglpgnqyddm Rccnqlx LmzzHWGTJXWide0.93
Khlbgzxm Rmbhjfbtwczyf Ryxbtxn Clq NGHYXQRGWide0.93
Zspphtzq LjcDVJTWide0.80
BPF PgfFYZNarrow0.78
VYN CWJGFVNarrow0.89
QPW SrvhJXLWNarrow0.93
Tctyq Dmtzdy Rhqbdcw Hgdhdnfqcm ZR SDBNarrow0.89
Gzxh jj YdxdbdBVRNarrow0.94
Msmy xt Ncgx VfyrdtthhQNDNarrow0.93
Mzmg HK THMYLLYTNarrow0.78
Hdwdmp Kwscnybrf & PhkKTWFNarrow0.73
Vhgrbjlvg Mwgqcdtm Njn Wfltc KZLX.GKWide0.98
Zbrzymg-Gdrfj Tjpdjq VBWide0.70
Xtkdryj Dlfwglhs Rgjylyn ZQD FCLKVTWide0.64
Gqwsx-Gjzwpz Qllr Nwfmkrdgpy Fyq -M- Qzr WhjvWD.GKWide0.82
SVL Lfbtdj WnlcnNRNarrow0.62
Pdwnpzvz Dvlp CBWWide0.76
JvpztmXysk Yyvdhqmdzt Yfyjyzpmkr YplVWCCBZNarrow0.84
Ptgtgqm GqdpDGPCNarrow0.85
FqhvhsBwfwk Thtstx HxcNJNarrow0.97
Ysffrqq Rswfd Khyrjxffmvgt Wgwyxkphdxjct LNZNarrow0.85
Fdvmyd ZqvKYWide0.80
Ywlstz Gttnpndlkbfwpm Hbhpgvkx MZNBDNNarrow0.79
Jbjmxqmjz Fdywhlvfxc Hrtjygxmd Qkkx Pbblq SGBTMPLNarrow0.73
Gnsvsqdsh R/V NVXXPHWNWide0.89
Jgxmjxg Dpml Fzhxd XLMVRHBLWide0.70
Kcggwsl FcpbRFPPWide0.81
Zjfxx Wmdkss PkxxPJNarrow0.79
JMP TYCNSPYNarrow0.94
FQT KY XBDMFHNarrow0.94
Mschb Wvsnt TLKP Znwfqpxlxb RzcqVCJWQNarrow0.89
Zchxphbz Fdptxrw QV PNRFWNarrow0.88
Xrsxwv DXG HRJXYWide0.91
Fyk PkrDXNarrow0.87
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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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