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Stock Strategist

Five Buying Opportunities From Our Upcoming Stocks Forum

Management from these undervalued wide- and narrow-moat stocks will be presenting at our fifth annual event.

In an uncertain and volatile economic environment, rather than shying away from investing, we at Morningstar think the market provides a wide array of promising wide- and narrow-moat companies for investors to consider. Many of these companies will be speaking at our 5th Annual Stocks Forum in early November. While we wait to hear from several C-level employees, we'd like to preview some of the participating firms that look attractive to us today.

Before delving into the companies, it is important to understand Morningstar's investment approach. We think buying wide- or narrow-moat stocks at a discount is a great long-term strategy. You can own a piece of a business with competitive advantages that will allow the firm to earn excess returns on capital well into the future, while benefiting from additional price appreciation as the market recognizes that underlying value.

Behind each of these companies' moats is a management team. Individual investors attending the 2010 forum will get the rare opportunity of direct access to a company's senior management. Some of these managers, including former Morningstar CEOs of the Year Will Oberton of  Fastenal (FAST) and Robert Silberman of  Strayer Education (STRA), will discuss how they deal with the constant pressure for short-term results while also managing the long-term strategies that make their businesses fundamentally attractive. For those who can't attend the event, Morningstar.com will offer on-the-spot blog coverage followed up by video interviews with attendees and presenters. 

While we think any of the 31 participating companies should be on the radar of long-term investors, below we highlight several of those firms that are currently trading at a discount to what we think they are worth.

 General Electric (GE)
Morningstar Rating: 5 stars | Dividend Yield: 2.9%
General Electric positions itself to be a leader in all markets in which it competes. After shedding underperforming businesses during the past few years, the firm has energy infrastructure square in its sights. We believe that GE will emerge as a leader in the power infrastructure market, which will be the backbone for the firm's growth.

 Range Resources (RRC)
Morningstar Rating: 5 stars | Dividend Yield: 0.43%
Range Resources is a first-mover into the potentially prodigious Marcellus Shale in the Appalachian Basin. With about 1 million net acres in the play, Range stands to extract significant value from the Marcellus during the next several years. Due to its early entry into the play, Range's lease terms are very favorable, which, coupled with the attractive cost structure and production profile of individual wells, make the play very economical with natural gas prices as low as $4 per mcf. Range's low corporate decline curve and its exposure to the Marcellus Shale reduce reinvestment risk and should translate into strong returns on capital for many years.

 Pfizer (PFE)
Morningstar Rating: 5 stars | Dividend Yield: 4.2%
Pfizer's foundation remains solid, based on strong cash flows generated from a basket of diverse drugs. The company's large size confers significant competitive advantages in developing new drugs. This unmatched heft, combined with a broad portfolio of patent-protected drugs, has helped Pfizer build a wide economic moat around its business.

 Myriad Genetics (MYGN)
Morningstar Rating: 4 stars | Dividend Yield: n/a
While Myriad's growth has slowed with the recession and a corresponding reduction in physician office visits, the firm's expertise in genetic analysis positions Myriad well for a rebound. The firm has established a narrow moat around BRACAnalysis, which detects genetic mutations that confer a high risk of developing breast or ovarian cancer. The pairing of diagnostic tests with cancer treatments is also an emerging trend, and we expect Myriad to directly benefit from steps to tailor cancer therapy to a patient's genetic profile. We're looking forward to hearing CEO Pete Meldrum's take on how the firm can use its strong free cash flows to encourage uptake of its newer tests, expand globally, and extend its moat.

 ArcelorMittal (MT)
Morningstar Rating: 4 stars | Dividend Yield: 1.9%
ArcelorMittal is more than 3 times larger than the next-biggest steel company yet has only 8% market share. This represents further opportunity for consolidation, and the company is well-poised to take advantage when the merger and acquisition market returns, given its global reach and access to high-growth markets, expertise in developing markets, and successful M&A record. Supplying 20% of the global automotive market's steel needs, the company has become a strategic partner for many large manufacturers as a major contributor to value creation, reaffirming its importance in the global steel market.

Here is a complete list of the companies that will be presenting at the 2010 Stocks Forum:

 ArcelorMittal (MT)
Market Cap: $52.2 billion
Morningstar Rating: 4 stars

 AT&T (T)
Market Cap: $170.0 billion
Morningstar Rating; 3 stars

 Boardwalk Pipeline Partners 
Market Cap: $6.4 billion
Morningstar Rating: 2 stars

 CarMax (KMX)
Market Cap: $6.2 billion
Morningstar Rating: 3 stars

 China Gerui Advanced Materials Group (CHOP)
Market Cap: $272.5 million
Morningstar Rating: 4 stars

 Choice Hotels International (CHH)
Market Cap: $2.2 billion
Morningstar Rating: 2 stars

 CoStar Group (CSGP)
Market Cap: $1.0 billion
Morningstar Rating: 3 stars

 Cullen/Frost Bankers (CFR)
Market Cap: $3.3 billion
Morningstar Rating: 3 stars

 Cymer 
Market Cap: $1.6 billion
Morningstar Rating: 2 stars

 Fastenal (FAST)
Market Cap: $8.0 billion
Morningstar Rating: 2 stars

 FedEx (FDX)
Market Cap: $27.7 billion
Morningstar Rating: 4 stars

 First American Financial (FAF)
Market Cap: $1.5 billion
Morningstar Rating: 4 stars

 General Electric (GE)
Market Cap: $181.3 billion
Morningstar Rating: 5 stars

 General Mills (GIS)
Market Cap: $23.7 billion
Morningstar Rating: 3 stars

 Gen-Probe 
Market Cap: $2.4 billion
Morningstar Rating: 3 stars

 Graco (GGG)
Market Cap: $2.0 billion
Morningstar Rating: 3 stars

 McCormick & Company (MKC)
Market Cap: $5.6 billion
Morningstar Rating: 3 stars

 McDonald's (MCD)
Market Cap: $80.6 billion
Morningstar Rating: 2 stars

 Myriad Genetics (MYGN)
Market Cap: $1.6 billion
Morningstar Rating: 4 stars

 Nalco Holding Company 
Market Cap: $3.5 billion
Morningstar Rating: 3 stars

 Parexel International 
Market Cap: $1.3 billion
Morningstar Rating: 3 stars

 Pfizer (PFE)
Market Cap: $139.3 billion
Morningstar Rating: 5 stars

 Range Resources (RRC)
Market Cap: $6.0 billion
Morningstar Rating: 5 stars

 Ritchie Bros. Auctioneers (RBA)
Market Cap: $2.2 billion
Morningstar Rating: 3 stars

 Sanofi-Aventis (SNY)
Market Cap: $89.6 billion
Morningstar Rating: 4 stars

 Steel Dynamics (STLD)
Market Cap: $3.1 billion
Morningstar Rating: 4 stars

 Stericycle (SRCL)
Market Cap: $6.1 billion
Morningstar Rating: 3 stars

 Strayer Education (STRA)
Market Cap: $2.4 billion
Morningstar Rating: 5 stars

 Texas Instruments (TXN)
Market Cap: $33.5 billion
Morningstar Rating: 3 stars

 United Parcel Service (UPS)
Market Cap: $67.3 billion
Morningstar Rating: 3 stars

 Wipro (WIT)
Market Cap: $38.5 billion
Morningstar Rating: Under Review

Data as of Oct. 6, 2010.

Morningstar analyst Jeremy Cohen and intern Jonathan Eng contributed to this article.

Heather Brilliant has a position in the following securities mentioned above: FAF. Find out about Morningstar’s editorial policies.