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Quarter-End Insights

Shop for Moats in Consumer Defensive Stocks

With roughly two thirds of this sector enjoying a narrow or wide economic moat, we continue to find pockets of opportunity when short-term concerns outweigh our forecasted long-term growth trajectories.

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  • The consumer defensive sector still trades at a premium to our fair value estimate, on average, but valuation opportunities exist given an abundance of companies with economic moats.
  • Severe price competition is still the norm for U.K. grocers, but market leader Tesco is aiming to buck the trend, which could help its long-term story.
  • With more-limited organic growth opportunities at present, acquisition spending and potential break-ups continue to fill the headlines in consumer staples.

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