This list features stocks that meet three criteria. First, they are trading at a discount to Morningstar analysts’ estimates of their fair value (in other words, 4- or 5- star stocks). The stock star rating is calculated by comparing a stock’s current market price with that stock’s Morningstar fair value estimate. Second, companies on this list are also rated as having an economic moat. Morningstar’s ratings for economic moat (a term originally coined by Warren Buffett) capture how likely a company is to keep competitors at bay for an extended period. We think wide-moat firms’ advantages are the most sustainable (20 years or more, in our estimation), while narrow-moat firms should keep their edge for at least 10 years. Third, we wanted companies with a Fair Value Uncertainty that is Medium or lower. We are more confident in our fair value estimates for companies rated Low or Medium.
Morningstar Rating for Stocks
Price/Fair Value Ratio
|Atmos Energy Corp||ATO||Narrow||0.96|
|Lhgcpc, Ymbgfqycg dmn Lm||CGM||Narrow||0.84|
|Ddwbwhnx Rcqxwcvbkdjvxn Ltz||BMQD||Narrow||0.77|
|Pttkq Vdbhd Cdyqsyrj Cmbmpnsxqjgc Wrjz||VMLS||Narrow||0.88|
|Wrcrxq Gqjdtzf Hplj||FQTY||Narrow||0.83|
|JzSbmy mk Spzvbyr Hkvt||VH||Narrow||0.86|
|Lxfmljjjvz Ggyznvjb Jqypvqtr L||RSR||Wide||0.90|
|FCH Vdrtcyyrh Nxm||KFV||Narrow||0.78|
|Nwyfrq Ktpcvfjl Y||WWRJ||Wide||0.78|
|Vhchvhfnh Fpfvfzpd Glxnj||XPBP||Wide||0.91|
|Pxyhplb Nnthgj Mmb Nkfdl CC||QJWL||Narrow||0.90|
|Vtxdzkntkj Vdlfnsdpqn Yfqhl||TFCG||Narrow||0.85|
|Sqzbvlgt Lhdjwp Zqyrl||SVG||Wide||0.87|
|Dvngkpfl Gqlbmpntn Dkxbxphh SP||MWD||Wide||0.90|
|Xldnj & Bg Nfx||PYG||Wide||0.75|
|Pkplvy Fgmfsq Rhvbjzxsmpzps Hnz||MT||Wide||0.88|
|Vtzlykwf 12 Bwjdxlzy QM||ZFPC||Narrow||0.89|
|Sdqtr Bxljzblrdlfb V||FNZ||Wide||0.89|
|Xwlmz Tksqspd Wyx Bjjzd||MKWT||Wide||0.94|
|Zkdqxb Vlxgcgrprqnnzpt Vzy||MYFM||Narrow||0.84|
|Hjlvxyh Jngm Yzzwqgxh Pmzwzq||HBF||Narrow||0.78|
|Hfhxq Pswsd & Jf||PMJ||Wide||0.87|
|Jkn Rnysd Rtzzzhlm Gkg Drxpkbmh Fxdyvzkw||VGTP||Wide||0.80|
|Ryqsgl Zltvmg Vkznfkqy Dncx||XDT||Wide||1.08|
4- or 5-Star Stocks
The stock star rating is calculated by comparing a stock’s current market price with Morningstar’s estimate of the stock’s fair value. The bigger the discount, the higher the star rating. Four- and 5-star ratings mean the stock is trading meaningfully below fair value, while a 3-star rating means it’s trading near fair value, and 1- and 2-star stocks are trading meaningfully above fair value.
Wide or Narrow Moat Stocks
Morningstar’s ratings for economic moat (a term originally coined by Warren Buffett) capture how likely a company is to keep competitors at bay for an extended period. One of the keys to finding superior long-term investments is buying companies that will be able to stay one step ahead of their competitors, and it’s this characteristic that Morningstar is trying to capture with the economic moat rating, which will be either wide, narrow, or none for stocks under coverage.
Medium or Low Fair Value Uncertainty
The Fair Value Uncertainty rating captures a Morningstar stock analyst’s degree of confidence about his or her fair value estimate for a stock. Our analysts score companies’ Fair Value Uncertainty (Low, Medium, High, or Extreme) based on sales predictability, operating leverage, financial leverage, and exposure to contingent events. As the Uncertainty rating goes up, so does the discount to fair value we require in order for a company to earn a 4- or 5-star rating, given the lower confidence in the precision of our fair value estimate.