The 10 Best Wide-Moat Stocks of 2022

The workweek. A visit to the DMV. Your kid’s first elementary school band concert.

Add 2022 to the list of things that people—particularly stock investors—are happy to reach the end of. Despite coming back from their lows, it was a tough year for U.S. stocks: The Morningstar US Market Index is down more than 17% this year. Outside of energy stocks, all other sectors are on track to finish the year in the red.

Given the dismal performance of the market this year, some may be surprised to learn that the 10 best-performing wide-moat stocks of 2022 that our analysts currently cover have posted double-digit returns this year—all in excess of 30%, in fact. As a refresher, we assign wide Morningstar Economic Moat Ratings to only the highest-quality companies, those we think can outearn their costs of capital over the next two decades.

10 Best-Performing Wide-Moat Stocks of 2022

Here are the top-performing stocks for the year to date as of Dec. 9, 2022, that are under Morningstar analyst coverage and that earn wide Morningstar Economic Moat Ratings.

1. Cheniere Energy LNG
2. Cheniere Energy Partners CQP
3. Merck MRK
4. Aspen Technology AZPN
5. BAE Systems BAESY
6. Lockheed Martin LMT
7. Northrop Grumman NOC
8. Corteva CTVA
9. Eli Lilly LLY
10. Campbell Soup CPB

Not surprisingly, none of these stocks are screaming buys today. However, four stocks on the list currently trade with Morningstar Ratings of 3 stars, suggesting that they’re fairly valued. As such, they may make good watchlist candidates. Here’s a little bit about each stock. All data and ratings are as of Dec. 9.

Cheniere Energy

• 2022 Return: 57.68%
• Morningstar Rating: 2 stars
• Industry: Oil & Gas Midstream

Cheniere Energy stock tops our list of the best-performing wide-moat stocks of 2022, with a nearly a 58% return. The company had a strong year, with financial results and forecasts exceeding expectations. The company is well positioned to be the exporter of the incremental liquefied natural gas supplied to the global market over the next few years, says Morningstar sector strategist Stephen Ellis. However, we think the stock is overvalued, as investors are assuming current market conditions will persist over the long term. In fact, we expect the European Union to reduce its reliance on Russian gas imports and its need for liquefied natural gas in the future, adds Ellis. We assign shares a fair value estimate of $143.

Cheniere Energy Partners

• 2022 Return: 45.03%
• Morningstar Rating: 2 stars
• Industry: Oil & Gas Midstream

Chenier Energy Partners units have returned 45% this year. This publicly traded limited partnership formed by Cheniere Energy is the direct owner of the Sabine Pass liquefied natural gas terminals and the Creole Trail Pipeline. The master limited partnership, which offers a 6.76% forward dividend yield, may appeal to some income investors specifically. But we think units of this MLP are overvalued today and worth $52 each.

Merck

• 2022 Return: 44.64%
• Morningstar Rating: 2 stars
• Industry: Drug Manufacturers—General

Merck stock has climbed nearly 45% in 2022 as the company posted strong results quarter after quarter after quarter. The drugmaker’s portfolio includes a sizable lineup of high-margin drugs and a solid pipeline of new drugs, which contribute to its wide economic moat. New products have mitigated generic competition, notes Morningstar sector director Damien Conover. Conover adds that Keytruda for cancer is a key blockbuster drug with multi-billion-dollar potential. We think Merck stock is overvalued today and worth $97 per share.

Aspen Technology

• 2022 Return: 42.61%
• Morningstar Rating: 3 stars
• Industry: Software—Application

Aspen Technology stock has risen almost 43% this year. The company provides software solutions to industrial users, with energy, chemicals and engineering, and construction among its top segments. The firm recently completed a transaction with Emerson Electric EMR that has given it a wider portfolio of products and services. Morningstar senior analyst Dan Romanoff thinks that the firm has a long runway for growth as it’s poised to capitalize on secular trends and benefit from its sticky existing customer base. We think shares are fairly valued today, trading near our $220 fair value estimate.

BAE Systems

• 2022 Return: 41.35%
• Morningstar Rating: 2 stars
• Industry: Aerospace & Defense

BAE Systems stock has enjoyed a 41% run in 2022. Like other aerospace and defense firms on this list, BAE Systems has benefited from a positive outlook for defense spending globally. The firm’s engineering and technical know-how and long-standing relationships with global defense departments underpin its wide economic moat rating, says Morningstar analyst Joachim Kotze. We think shares are worth $35, and they currently trade about 17% above that.

Lockheed Martin

• 2022 Return: 39.27%
• Morningstar Rating: 3 stars
• Industry: Aerospace & Defense

Lockheed Martin stock has returned more than 39% in 2022. The largest defense contractor globally, it has also attracted investor interest because of heightened geopolitical tensions and the expectation of increases in defense budgets. “While it’s difficult at this stage to pinpoint exactly how far this defense spending upcycle will go, with think heightened geopolitical tensions are likely to last for at least several years,” says Morningstar analyst Krzysztof Smalec. We think Lockheed Martin’s shares are about fairly valued, trading a bit above our $447 fair value estimate.

Northrop Grumman

• 2022 Return: 38.40%
• Morningstar Rating: 1 star
• Industry: Aerospace & Defense

Northrop Grumman stock is up more than 38% this year. Like other defense firms included here, Northrop has garnered investor interest this year. “The three biggest stock-specific growth opportunities we see for Northrop are the Ground Based Strategic Deterrent, the further militarization of space, and the development of the B-21 bomber,” says Morningstar sector strategist David Whiston. We think the stock is worth $368; shares are significantly overvalued today.

Corteva

• 2022 Return: 34.45%
• Morningstar Rating: 3 stars
• Industry: Agricultural Inputs

Corteva stock has rallied more than 34% in 2022. This agriculture pure play—the global leader in seeds and crop protection products—was spun off from DowDuPont in 2019. Corteva has been able to increase prices in excess of cost inflation, says Morningstar strategist Seth Goldstein. Goldstein adds that the recent Stoller acquisition will help expand Corteva’s biologicals portfolio, which is a good strategic move for the long-term growth of the crop protection business. We think the stock is about fairly valued today, with shares trading near our $70 fair value estimate.

Eli Lilly

• 2022 Return: 32.11%
• Morningstar Rating: 1 star
• Industry: Drug Manufacturers—General

Eli Lilly stock has risen 32% in 2022 so far. The drugmaker focuses on neurosciences, endocrinology, cancer, and immunology, and its key products include Verzenio for cancer; Jardiance, Trulicity, Humalog, and Humulin for diabetes; and Taltz and Olumiant for immunology. The company has established a wide economic moat thanks to its patents, economies of scale, and powerful distribution network, says Morningstar’s Conover. But we think shares are significantly overvalued today and assign the stock a $256 fair value estimate.

Campbell Soup

• 2022 Return: 31.48%
• Morningstar Rating: 3 stars
• Industry: Packaged Foods

Rounding out our top 10 wide-moat stocks list is Campbell Soup, with a 31% total return for the year to date. In addition to its namesake brand, the company’s portfolio also includes other well-known brands including Pace, Prego, Swanson, and Pepperidge Farm. Investors warmed to this consumer staple stock in 2022. But we see macro conditions and competitive pressures heating up for the firm, says Morningstar sector director Erin Lash. The stock currently trades near our $53 fair value estimate.

How Find the Best Wide-Moat Stocks

Wide-moat companies carry sound balance sheets and significant competitive advantages—two desirable qualities in the face of today’s economic uncertainty. But wide-moat stocks aren’t necessarily the best stocks to buy at a given point in time. How much an investor pays to own a company—wide moat or otherwise—is important, too. The key is to buy high-quality companies when they’re trading below what they’re worth.

Here are a few ways to find high-quality stocks on sale:

• Check out our quarterly article, 10 Undervalued Wide-Moat Stocks. Each quarter, we profile the cheapest stocks in the Morningstar Wide Moat Focus Index.
• Peruse our Moats on Sale list. Stocks on this list have either wide or narrow economic moat ratings and are trading in 4- and 5-star range.
• Find wide-moat stocks that meet your own criteria using our Morningstar Investor screener tool. You can screen on stocks based on their economic moat ratings, star ratings, and other valuation and profitability metrics.

For more about how Morningstar evaluates stocks, read Morningstar’s Guide to Stock Investing.

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