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Stock Strategist

Sizing Up Four Consumer Firms

A look at four companies presenting at the 2011 Management Behind the Moat Conference.

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Morningstar's sixth annual Management Behind the Moat Conference will be held November 9-10 in Chicago. This year, 40 high-quality companies from Morningstar's coverage universe are scheduled to present, including  AutoZone (AZO),  General Mills (GIS),  McCormick (MKC), and  Strayer Education (STRA) from the consumer sector. To get investors prepared for the conference, we've put together brief summaries for each of our presenting companies, including our thoughts on the stock valuation and any potential catalysts on the horizon, our views on the companies' competitive positioning and assessments of their economic moats, and what we're expecting to hear from management at the conference.

AutoZone (AZO)
Economic Moat: Narrow
Uncertainty Rating: Medium
Price/Fair Value: 1.11

Although Autozone should enjoy a long growth runway, we think shares are slightly overvalued at current prices. The present market valuation, in our view, has already baked in much of the firm's growth prospects and presents more downside than upside. Given continued economic weakness, we see few signs that negative catalysts will emerge in the near term, but we remain concerned that industry tailwinds may reverse (brought on by rising new car sales, for example) and impel auto-parts retailers to return some of the substantial margin gains they have made in recent years. If market prices were to trade closer to our Consider Buy price ($200 per share) though, we would comfortably recommend shares, since we believe AutoZone is the best operator in the attractive aftermarket auto-parts retail space.

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