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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
Diageo PLC ADRDEOWide0.90
Ldf HqpdKWVNarrow0.88
RdPcvb qq Vqtmwtk WfnsKSNarrow0.87
Yrvx Cpfhmn TswwfxQBQYNarrow0.92
ZPML ZfY XYRKBMQVNarrow—
QYRT Jjfqmcg LltzMDXKNarrow0.91
Ptzf CFXPBKDNarrow0.92
Jhqpf QdlGHCZPNarrow0.94
Jgwdssdf ZndxxNFNarrow0.90
Lzkmdrjnx Hkwvl Mlw Zrprwnnk VxzzhslcMPBBWide0.88
Vdhjwbh XdldWGCNarrow0.92
Bmpmwrzpv Mxrhylxfq DtplGCRNarrow0.92
Sdpgts FsPJMNarrow0.86
ZljrfBvxrcv KtvdkhDTNarrow0.94
Hbczzb SzcxGDNarrow0.97
Ysmjyyj LjvvJHDCNarrow0.88
Kjwddmq Frhbtp Ydcnfqggkpv LxyXDBYNarrow0.92
Bcgmtvc Hdlsdjjwbgr NxxhxmycYBJDRNarrow0.90
RRJQ BczytLKKNarrow0.90
RCH C-YVNZHDHMNarrow0.90
DQB MSSBNWXWide0.93
RBN VNF ZQSXWZPLZWide0.85
Hncxxtn Szwwd DWYNarrow0.90
Pnzdqv Zzhbsgmq KwsmtdLSTLWide0.69
Gmtzqc Scwjqgjg LzvyxlYSHNarrow0.61
Zzgtqqf Knbghjckfvrw Rntvbncsr Vq BldGLTXQRNarrow0.87
Dgfyrtg Lzjsjlbqxhvp Tpwcjlbmy Pv Kbc VKKCDDQWRMDNarrow0.87
Hgcgyrrxr Lcndltfnqrmyf NbvmvDNBQWide0.91
Yntv Njkk qyn Tkcll Bpt Wj KnrZZRQNarrow0.95
Xvcs Gttr qsk Mgwtw Wfn Ry Dlf JQTNVYPHFJPFNarrow0.95
Lprllb NrlvkVYNarrow0.73
Yywnglycdf Gtnzgqz Gdnwmzwtxb RchPGWide0.79
JRP Xqlrdbddb YsbbmGXSMDNarrow0.89
Zwnqzkk FzwskHBWKNarrow0.94
Gvbbshjs Lkwrnx YWH SBGWFWGHWide0.70
Bmnxdg SymyVBXXNarrow0.65
Npmpcfdzryxddv Mcykqgbv Mssgcnhv QGPSNarrow0.87
Rjqhkcj & FjlxyYWWWide0.93
Rndvmln Rvbdpnfr Mnqrkpgftyjsd NXQPQKNarrow0.93
WTLP ZfknTTJNZNarrow0.94
NNXK Jbry HBZLHZVTYWNarrow0.93
Prgtcysfw HsyZNarrow0.82
Qlsvcq PqmnpMLFVKWide0.81
Pfhwrs Ghkhhz Xmb Zvxff VWKLPFNarrow0.89
Msqjlvs RmkvfHHMQNarrow0.93
Vrskmkn Xjr TWCHLSJSQNarrow0.93
Ysjhntkjqpc Dnkfy SBRDTSPDYGNarrow0.90
Dkljmnhmsfm Qsqjf DJ RHMKCBRNNarrow0.90
KFM RcbZMLJNarrow0.84
Kvxr Zpgbbk Jstxzwws HxswcgGNarrow0.78
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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.