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Commentary

3 Narrow-Moat Stocks That Look Undervalued

Narrow-moat firms as a whole have underperformed during the past year, leaving a few stocks trading at discount prices.

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Stocks had a solid rebound last week from the previous week's decline. The Morningstar US Market Index rose more than 3% last week in the face of decent, but not spectacular, earnings and a handful of shaky forecasts for the rest of the year. Economic data released during the week were also mixed. Initial jobless claims fell and showed steady (if painfully slow) job growth, while gross domestic product growth came in below expectations. 

Last week's rise adds on to the impressive performance the market has turned in recently. The Morningstar US Market Index is now up more than 16% during the last 12 months. But how even has that performance been? Have investors been bidding up more speculative no-moat stocks or flocking to wide- or narrow-moat firms with sustainable competitive advantages?

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