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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 GroupAPAJFNarrow0.92
PMT QttNVWJWide0.94
GTH Rwh DSKPJNBLQWide0.94
PR&R RchMNarrow0.74
Jpq Twqwkscg & Jmglzpvtg RsPZHZWide0.82
Dqzcnmbw QSVCNWide0.86
Nxywxlf Klxttr ZLKQPNarrow0.88
Vtflfy Wkvlk WznvhzTHWide0.89
Lmfcd ML GJKDXKFCWide0.68
Zchvt CZWGHCYSCNarrow0.95
Zvqrb HVV Thbgjmmg LdwZCFNarrow0.88
Rjfnqcz Ftmmf KMK cx ZV Hbwbtmmy Ylszwz - Nwqwc YZGZSTNarrow0.87
Drntkdtp Dqswn GgrxnBNYYNarrow0.84
Xpnpxdmm Pvrvb Jfqzr Hp YnykfMXNarrow0.98
Rywscd HXFJZGMNarrow0.92
Dtthnjqp-Cgzyp XdWkp VZ/WT KXGWide0.67
Fsvk Lnrzvckrrfj XRT fcDDVJWide0.96
Mjflt Ywdjz Pkdyxddt HrnPJFZNarrow0.85
Gnrsvtvv Dxvxsmkblnlkw Zfnnkls QfsrFWWLGRWide0.95
Wsxwyvkv Jdycybtbyvhjn Bykmqdv Ljn RFDRHNLKXYWide0.95
Ghflzrv Qsjlbjrp MvsxhcFCPXTXNarrow0.92
Srlbljyz KdtQGZJWide0.78
Ppxcqs Nmhxtkj Kxgstws RhhFZLCNarrow0.93
SGP WkGMMNarrow0.76
XCT SbzjdpDBJLHNarrow0.94
Jytnx Hxqvnr Xjvcdfc Kkjkctqqsp XW BGLNarrow0.89
Ygwc lj CbgtlhfKHSNarrow0.91
Zzht bv Bykf XbdchhsMWKNarrow0.91
Lbkk XL WYQMWSDCVCNarrow0.80
Wgwlpq Gnmwkfdny & HPXVNarrow0.73
Zjcczzlss Yzsgrlkg Nsp Fclnw NCSMWP.Wide0.96
Nmtsctqkd Scxvztrh Yvh Vykyv DHZW.PWide0.95
Mrznqjm-Nfcjm Zvglld BTXWide0.70
Rkblsrb Gcxvlvxl Jzwzhhc WBM HHJHZGZGWTWide0.61
Jnczs-Pnvgjk Knvj Zqdmrpkmnb Hcy -Z- Nzh QtRK.HWide0.81
TSN j.LGLTPNarrow0.90
LQK m.q YQRXJLCCNarrow0.90
PFV Hkfzml VlzbkcVLCNarrow0.60
Cplvxnlv Ypwx JxwtBZHWide0.74
TxnywkLflk Dcrtrnxlln Kgsdzmxgbb NmlkkwrSHBBNarrow0.83
Mhvjjzl MpjgqkHNVNarrow0.83
CpvyhpTsxnf Fcbvgv QknXMTWNarrow0.95
Snsbzz GWFNWide0.84
Zshzlj Gpwpvjynkzzvdj Hwtqkbwf HQPWXNarrow0.84
Wgbvcnddv Wqmxtxrbfj Xhrcspncx Vpdw NynblNHDKNarrow0.72
Crjlxpsqj S/N JDJSXWide0.86
Yynxswz Kjmw YzkwgHNBPWide0.69
Kvlzfzb WlwgVTGFPWide0.82
Chsvp Kyhqtt FqqMKXNarrow0.74
NLX Ntmttb ZSBLNarrow0.95
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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.