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Commentary

3 Overvalued Quality Stocks

Moats are great in this environment, but don't forget about valuation before jumping in.

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Investors have no shortage of worries on their minds right now. Will the U.S. economic recovery get derailed by the fiscal cliff? Or problems in Europe? Will a slowing China put pressure everywhere? Will the Federal Reserve's new bond-buying program work or just stoke inflation? 

This uncertain world can be unsettling, but it doesn't mean that investors need to be unreasonably fearful or abandon their asset allocations. We've long advocated that equity investors would be well-served by buying firms with great competitive advantages, or economic moats. That's still good advice today, but with stocks hitting multiyear highs, investors need to keep valuations firmly in mind before diving into the market.

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