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Quarter-End Insights

Shop for Moats in Consumer Defensive Stocks

With roughly two thirds of this sector enjoying a narrow or wide economic moat, we continue to find pockets of opportunity when short-term concerns outweigh our forecasted long-term growth trajectories.

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  • The consumer defensive sector still trades at a premium to our fair value estimate, on average, but valuation opportunities exist given an abundance of companies with economic moats.
  • Severe price competition is still the norm for U.K. grocers, but market leader Tesco is aiming to buck the trend, which could help its long-term story.
  • With more-limited organic growth opportunities at present, acquisition spending and potential break-ups continue to fill the headlines in consumer staples.

Adam Fleck does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.