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Stock Strategist

20 Great Businesses, 20 Cheap Stocks

Looking for bargains but still want quality? These wide-moat firms are worthy candidates.

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The steady upward climb of U.S. markets over the past year has brought welcome relief to investors punished by what will arguably go down as the worst U.S. economic downturn since the Great Depression. Although there are many reasons to be optimistic about the long-run health of the U.S. economy and future corporate profits, the extended rally has plucked most of the low hanging fruit, leaving the U.S. equity market, as a whole, slightly overvalued by our estimates. It seems that market participants have put the 2008 crisis firmly in the rearview mirror, even though current market valuations would be hard-pressed to maintain their lofty levels should the economy retreat again during the near term.

Despite this uninspiring investment backdrop, we continue to believe that patient investors, who give thoughtful consideration to business quality and valuation, will do well over time. The Morningstar Wide Moat Focus Index captures this belief in an investable strategy. This index is composed of the cheapest wide-moat firms in our 1,700-stock coverage universe. Index constituents possess their industries' strongest competitive advantages, which we believe will persist many years into the future.

Morningstar Analysts does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.