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(DAVID LOH/REUTERS)
(DAVID LOH/REUTERS)

NUMBER CRUNCHER

20 U.S. stocks with wide economic moats Add to ...

What are we looking for?

Moats – in the economic, not the watery, sense.

Few things are as important to a company as the ability to keep competitors at bay. Companies that have wide economic moats are able to consistently generate profits despite rivals’ best efforts to plunder their opportunities.

For that reason, Warren Buffett is fond of taking stakes in companies with wide moats and holding them for a long time. He and other investors like the steady, dependable earnings these enterprises tend to produce.

More Related to this Story

How we did it

Craig McGee, senior consultant at CPMS Morningstar Canada, scoured the CPMS U.S. database for stocks that have what Morningstar defines as a wide economic moat – a sustainable competitive advantage such as patents and copyrights, huge market share, the ability to produce a product or service at the lowest cost, or high costs for a customer to switch to a rival’s offering.

He ranked these stocks looking for the best combination of expected price change (using analysts’ consensus 12-month target price), revisions over the past three months in consensus earnings estimates for the current year, and percentage change in the latest quarter’s earnings per share compared with the same quarter from the prior year.

More about Morningstar

Morningstar Inc. provides independent investment research in North America, Europe, Australia and Asia. Its investment research tool, Morningstar CPMS, provides quantitative North American equity research and portfolio analysis to institutional clients and financial advisers. CPMS data cover more than 95 per cent of the investable North American stock market.

What we found

A number of companies that share few similarities other than their moats. LinkedIn Corp., the high-tech haven for job seekers, makes the grade; so does Mr. Buffett’s Berkshire Hathaway, a collection of low tech but strongly profitable businesses ranging from insurance to rail freight.

The accompanying list should provide moat-seeking investors with ample inspiration.

Remember, though, that nothing is eternal. You should always do your own research to ensure that a shift in technology or market position doesn’t threaten a company’s competitive advantage.

 

Undervalued U.S. stocks with a sustainable competitive advantage

Rank Company Symbol Market Cap
(US$ Mil)
Morningstar
Economic
Moat
Expected
Price
Change %
1 LinkedIn Corporation LNKD-N 20,209 Wide 13.00%
2 Plains All Amer Pipe PAA-N 18,989 Wide 8.90%
3 Berkshire Hathaway Inc. BRK.B-N 264,183 Wide 15.90%
4 Facebook, Inc. FB-Q 59,988 Wide 33.00%
5 Franklin Resources Inc BEN-N 29,459 Wide 26.70%
6 Intuitive Surgical Inc ISRG-Q 20,143 Wide 23.60%
7 Qualcomm Incorporated QCOM-Q 105,329 Wide 23.00%
8 Novo-Nordisk A/S NVO-N 87,093 Wide 13.20%
9 Home Depot Inc HD-N 112,291 Wide 9.90%
10 Monsanto Company MON-N 51,767 Wide 18.60%
11 Blackrock Inc BLK-N 43,207 Wide 11.90%
12 eBay Inc EBAY-Q 68,660 Wide 19.10%
13 Biogen Idec Inc BIIB-Q 51,718 Wide 6.00%
14 Walt Disney Company DIS-N 115,134 Wide 9.50%
15 Amgen Inc AMGN-Q 73,115 Wide 12.80%
16 Enterprise Prod Prtnrs EPD-N 57,637 Wide 4.80%
17 Eli Lilly & Co LLY-N 56,508 Wide 13.60%
18 Express Scripts Holding ESRX-Q 50,621 Wide 6.60%
19 Beam Inc. BEAM-Q 10,173 Wide 10.70%
20 Kinder Morgan Energy KMP-N 32,989 Wide 3.90%

Source: Morningstar Canada

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