Regular readers of this column know that Morningstar has a thing for moats. We think that companies that have established significant competitive advantages--or in our parlance, that have dug moats--can better withstand competition and earn high returns on capital for years to come.
However, valuation matters, too. As a result, we can be positive on a company but negative on its stock. Sure, our analysts may suggest on occasion that investors pick up shares of particular wide-moat companies that are fairly valued by our metrics. But you'd be hard pressed to find anyone at Morningstar who thinks it's a good idea to buy a wide-moat stock trading in 1-star range.
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Susan Dziubinski does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.