A Tale of Two Markets

After more than a year and a half of frenetic market movements, investors must feel like they've come down with a bad case of whiplash. Although stocks aren't anywhere close to recovering the ground lost in 2008's sickening descent, they have moved sharply higher in 2009.

But unlike last year, when high-quality stocks were a place of refuge, investors have shown an appetite for lower-quality fare in 2009. It's not unusual to see more-speculative stocks lead the way early in a market recovery, and this year has been no exception.

Morningstar's moat ratings provide a window onto this trend. Morningstar equity analysts assign moat ratings to all 2,000 stocks they cover. A wide-moat business possesses some competitive advantage that will allow it to keep its competitors at bay for an extended period of time, in the analysts' view. In contrast, no-moat firms generally operate in extremely competitive industries where it's difficult to gain an edge over rivals.

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