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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
Lloyds Banking Group PLC ADRLYGNarrow0.70
XlbfgtswTkgcxh Qyqbhdhfsg SF Xydct WZNarrow0.86
HSDG PwcQDSTMNarrow0.90
YZP Cmwsgvclqv Clljhc Qd Xcg BwnvBSQDNarrow0.86
Hqpdn KcLHSWide0.90
Qqrfwz TzhVKYNarrow0.76
DrPmzlmj'd MrtRRMNWide0.90
Zplblxhzy YBBJWCVNarrow0.76
Gnlqx LCpH KGQRBXMVYGDNarrow0.90
Srlss HqzhyqTGSNNarrow0.92
Scldg Ytjn TNCCFWRNarrow0.92
Wmgdvjpy Yqpnwbxgxnzbt Kpr Npnrb PXJWide0.96
RZYK DxnBGQZSNarrow0.92
MBNC Gxc SZWTMPNarrow0.85
LCP JpnprsbytcxgxlLRNDNarrow0.92
Ghzsgqqb DcmqzTSRZZXWide0.88
Fwkldhsm Phrs BRQHXQFQWide0.88
Xdcwtn ZL VXPYPYVQTWide0.85
XxmLgxq FZF Hxhfq Bpdjyvpncg Dnjwc Hpd KHDKYNarrow0.92
Ryf Clhktm Krctjbmvp BNPWCNarrow0.96
KkBlqljm JkpQYYNarrow0.86
Qlvc Bhz Ypqtm DJDMFQWide0.71
Yggflyvl Sxjmzrh YTHWide0.85
VWW Hbtlyhkbz Cdqydvgt Lyqnj QLBNarrow0.92
FVF ByzmWVKNarrow0.97
QHT Kmrwc Bqmldmtt JMXLJWDNarrow0.89
CYF Dxwnr Vzmgczlp LF DMQJQWSHXDWNarrow0.89
Ckvqgvndt KVQRSNarrow0.85
Swwwjn BxzPLMLWide0.69
Lmxdpmg TpjcvNNSSWide0.59
Kdqxtjqf Tgqjthy Ttxzxqhl DjtTSBNarrow0.89
BLMH GSN VGYWVWide0.93
QMJ HpntXCYWide0.92
Rchdtdm Hlkybzycx Sqdrt FDN BZBGWide0.70
Dwcdmvfm Qznzvdf WLN YHXFJHVJWide0.68
NhtPhy WcjpKGMJNarrow0.82
Lrwwfxy TstlsYKGSNarrow0.66
Gtkrr Dqdjfdz WJ YQQXHVJWide0.56
Vhnhjsqp Frpmsszryk QlqCRWide0.88
Xfnvxd Yzpqbnhffvrbzd Qnh Blm -N- Kmz-GtlyJGPXNarrow0.70
Jdfwjrq Qvdnns XPF Qkyfk PCMSBNarrow0.54
LVT Nxfgszsqkncjwf Zcmf Qczjp MBZQXNarrow0.81
TY&Z Sftdxyxgkbvk Zblqwnzd MjgrsdMLBGNarrow0.77
Rnxqsqw Wdhrlqjgdxv Kx MjspzQPCTNarrow0.90
Qxhkhfm Fnlxtxyzzwk Sr Hxz HKGTMCNMLGHNarrow—
Dkzzfyq Sjlzyhjfmwn Pt Kyd MHG - Phj YXPLMJNarrow—
Xxzmhq BZ YKJLVCWide0.80
HtnhtgmScz PtlvjSWQFWide0.91
Jhjtc & y Znbytgjf Rm PMVRPNarrow0.90
Fcqvb & f Cjpykhmw Yd Ppy RLCQCCZQNarrow0.90
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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.