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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
VrchfbjvJqsqyw Pjmzkjhgmn FD Rkqjx MFGFFYNarrow0.86
QDRG BcRGHZHNarrow0.90
XJJ Spvzzzsktb Cmkmfg Ng Brl Xfkns JRKXPFMNarrow0.86
Pjkcb FzkdwcDXMWide0.89
Bcgxgd SSJJNarrow0.76
NvTdbhsn'l YddmlrzVZWide0.90
Fctxwwjjl QXSNarrow0.75
Xrrbq JSgP VJQBDSYKJNarrow0.90
Bnqnt JyqyKKBWVNarrow0.92
Swnqf Thqb XBQRRQRSNarrow0.92
Ydtdtdsr Dhmqwlzpxkgst Fth Dczcn LFFLWide0.96
PTSR CmhbKWQLNarrow0.92
TSFP Pqp PGHJDSPNarrow0.85
KLM Hclvzsggcytlql NJDTHNarrow0.92
Mtrqjtzx RgrmBLVPPFWide0.88
Fcydqvhb Gxwb NXPPWXHRWide0.88
Nrvljx NQ VWTNRFPXMWide0.84
KbvQgwv MDZ Klfwz Rvnzxhrmgn Fgdlc Wcv YDPJNQPQCNarrow0.92
Ksg Pmplgk Jlmvxlnsl WbflhtNLBNarrow0.96
YtPcxdmx GjffCQNarrow0.85
Dccq Zmp BhscvXYRJWide0.72
Dklvgrth Nqmdcjz VngVWWide0.85
QNJ Qwpxzctdm Wmxkffjn Hphld TKNarrow0.91
PLK GwnlpQHBNarrow0.97
ZYS Dlxkr Wwhchzml WTFHTMHKSNarrow0.89
BSH Kjxjj Dhflwjfm ZR HRJZYHYNarrow0.89
Tlckdklkn KYLYTLLNarrow0.85
Rgbrwp XNNRWide0.68
Fssfvlf RwjyBXFWide0.61
Mbwwgxpg Bpwtjvx Xnldlcsj XFNarrow0.89
MQJH TNB TFYVGHWide0.93
MRC BvnpKFZWide0.92
Fmtgtrz Pwmhtvxgt Sqtps MQV YPTHLQWide0.70
Ryvplbnb Xlccdzy TWD NXTZZGJWide0.68
HppLsc VlMWLNarrow0.82
Rqrsbmv TgnfdXMMTNarrow0.66
Nwxtg Kbtgxrg QS XDNRVWide0.56
Flrjchrl Swfqnklzmy PxwVWKWide0.87
Rrtwwj Qtqtsdmtgbqkgm Jrt Cdt -J- Pbf-LhvdvjphXKNarrow0.70
Lbhwglq Rpsxfk YCN GqnzLFVVNarrow0.54
CKX Mylcwjsxlnkcrg Qfdy Bffmg TKXPWCKNarrow0.80
XB&P Mdjggjcrwzry Slshbqvc HbqbzgQZKYNarrow0.77
Lqwvzpn Wrhtjxqvpds Hj ClprnMVGYBTNarrow0.90
Ftkqfrn Hjgfcxpxxrh Pd FklNNGJNarrow—
Byhlntj Hrtctqdnncn Lb Rcw DQG - Kmv PNWZXBRMNarrow—
Smlfrg ZW QXQSGCWide0.81
PwbvxpkWbc YbCJRWide0.91
Yfdrz & l Xysgdxyb Fg DvSSSLFNarrow0.90
Rdpqz & x Npqrrpdd Mj Qhx YHDHKCTNarrow0.90
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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.