Wide-moat companies carry “sound balance sheets and significant competitive advantages” — two desirable qualities in the face of today’s economic uncertainty, says Dziubinski in a Dec 31, 2024 note. “Over time, we’ve found that the strategy of investing in wide-moat stocks trading at a discount to their fair values has been an effective approach to stock investing.”
As at Dec 27, 2024, the 10 most undervalued wide-moat stocks in the Morningstar Wide Moat Focus Index are:
- Estee Lauder (EL)
- Huntington Ingalls Industries (HII)
- Pfizer (PFE)
- International Flavors & Fragrances (IFF)
- Nike (NKE)
- Campbell Company (CPB)
- Brown-Forman (BF.B)
- Zimmer Biomet (ZBH)
- NXP Semiconductors (NXPI)
- MarketAxess Holdings (MKTX)
The most undervalued wide-moat stock on the list is Estee Lauder, listed on the New York Stock Exchange (NYSE). Its shares were trading 54% below Morningstar’s fair value estimate as of Dec 27, 2024.
See also: HSBC upgrades LVMH, Hermès to ‘buy’, but sceptical of 2025 turnaround for Swatch, Kering
The last company on the list, Nasdaq-listed MarketAxess Holdings, was trading 25% below Morningstar’s fair value estimate.
“We think all 10 of these names are high-quality stock ideas for long-term investors to consider,” says Dziubinski.
See also: Hunting for value in luxury stocks
Among the 10 names, Estee Lauder’s shares fell the most over the past year, declining 47% to close at US$73.98 ($101.28) on Jan 2.
Shares of Nasdaq-listed processed food company Campbell's Co fell the least, declining 6% over the year to close at US$42.03 on Jan 2.
NYSE-listed International Flavors & Fragrances is the only company on the list whose share price increased over the year — its shares retreated from a 52-week high in mid-October 2024 to close at US$83.09 on Jan 2, up 2.05% over the year.
