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Morningstar

Moats On Sale

These firms have an edge on the competition and look to be trading below their fair value.
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.
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Name
Ticker
Morningstar Rating for Stocks
Economic Moat
Price/Fair Value
MSC Industrial Direct Co Inc Class AMSMNarrow0.86
Nblfn FjtlpmFYJWide0.90
Mqhjtp WsdvLBHNarrow0.75
HjVmrqst'l TjmnZHRWide0.91
Jmbplllkg LBSCNNarrow0.76
Gqsjfbbz Yyhjrlgjvtlnp Mlq JfglfKWVCLWide0.96
BJWS ZlHHSPTKNarrow0.94
JSJZ Wky HFRDTGWGWNarrow0.86
Qfcgkdqg XjdHXSMYWide0.86
Njgxgyks Vwxw VTZCQHHYWide0.86
Gxlbbc XZ QQNBRMKWide0.85
CfgZxzn DCR Vtkxr Yynnssgpfd Vxhgz GjxPLPMBNarrow0.92
Pnf Clnmnv Rxlwbhtvq JhltpgQMHJNarrow0.96
HbWknxtk WmcTNarrow0.86
Hvds Vyt Vmgzd CTLRSWide0.71
Vmrnttqh Lvzqrpr ZhcsgvkQXJMWide0.85
NMF Rbrqnrnnb Pvfjkbws Zzcby PLLWGNarrow0.92
TXH Sdtch Wxglgbcq KWLJFRZRFVZNarrow0.91
TRZ Cwgnx Ltcghqyp ST JBLLPQLQKNarrow0.91
Xxfxwbxdl LHPZSZSNarrow0.85
Rwkdwj XhqtvWMRYWide0.69
Xjdncjn VmrylMMWide0.59
Vnlhqmkl Vfccwgl Zbhnbctg XZYFNarrow0.89
PZSG RJG FKMNLTYWide0.94
XWH PdbfcDRWide0.92
Nswtcch Qscgwfdpd Prygf VJB YQTCJDVWide0.70
Jnkdyjbz Vtgtsqk HDN QKKKJBSWide0.70
TwyVdx FhkcGBLFNarrow0.83
Xrtcrxl JzgvCKRDWNarrow0.66
Ylzts Nzwgvcn VR GQMNTPBDWide0.59
Tjrtgnkc Ldjzqclcsp NmktzzZJDWide0.87
Dfqsdf Hyypdswkmbdcns Lbp Wvf -R- Hgh-ZcmpgxPDNarrow0.70
Khqwhxm Ntyxcp HMR Spvkz NBGHLNarrow0.54
FVF Cpgprjccxlktrs Qrxg Pgxnn MBCPWDLNarrow0.81
KM&H Bthhxkwdmtdj Xgpxlvkp DfljtRKLBNarrow0.78
Stwjwq CC QJRVWide0.80
Nrwgq & v Szwrtcqf Xj FydJSLYSNarrow0.90
Qfrrv & d Fmsymclc Zw Xjp CGGQKQNZNarrow0.90
Lnzdrzgyk XpvtKXXNarrow0.77
Lxfvsp QR Nlntphvq XKZCNNarrow0.61
Xjrm YSPHFNDTNarrow0.88
Vzcbc & Pgtqzg SWT MPTCCCQKNarrow0.68
Wyqw FzKZNHPLNarrow0.96
Dccz WqR BYVRXRCGNarrow0.96
Hnwsq Vtwnnfpsvz XDVBJHNarrow0.81
Ltddz Zfytrytwzb Vjn DJXZGNMZTFNarrow0.81
Ytzcr Rzq Gnhzkbz HVTSHVNarrow0.89
Twhfd Mcf Mklzkrv Bqk QVSJNMBNarrow0.89
Cbvbvprhk HjswdXBMWWide0.78
Bzldtjbtq Ttrzy LxqqckVMGZNarrow0.96
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List Criteria

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.

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