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Commentary

Wide-Moat Stocks No Longer Cheap

High-quality firms still have plenty of advantages, but being very undervalued is no longer one of them.

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One of the bedrocks of Morningstar's approach to stock investing is that long-term competitive advantages really matter. We're always interested in buying great companies that will be able to produce a healthy amount of cash flow and returns on invested capital through thick and thin. We view these wide-moat companies as the core of an individual stock investor's equity portfolio. 

But these great companies aren't great investments at any price. Paying too much for a stock is going to end badly no matter how incredible the earnings potential of the underlying company is. Today, wide-moat stocks aren't wildly expensive, but the great bargains of six months ago are long gone. Investors, therefore, need to exercise much more caution before jumping into equities.

Bearemy Glaser does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.