7 Surprising Stocks to Consider

These large companies lack economic moats and have negative moat trends--but we think they’re attractive nonetheless

Susan Dziubinski 10 February, 2021 | 2:00AM
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Happy People

Some things just go together. Chocolate and peanut butter. Tom Petty and the Heartbreakers. Teens and their iPhones. Morningstar and moats.

As longtime readers know, our approach to stock investing rests heavily on the idea of economic moats. We believe companies that have carved out economic moats have unassailable competitive advantages that should allow them to thrive for a decade or more. And even better than a company with a moat? A company whose moat exhibits a positive moat trend, meaning that its competitive position isn’t just solid--it’s improving.

That being said, valuation is important. No matter how moaty a company, we won’t suggest you buy it if its stock is overpriced. Conversely, there are plenty of underpriced stocks that may not be competitive juggernauts, but they’re attractive investments at today’s prices.

This week, we’re screening for stocks that land in the large-cap area of the Morningstar Style Box that lack economic moats and even carry negative moat trends but are underpriced according to our metrics, trading at 4- and 5-star levels. Seven stocks make the cut.

Surprising Stocks

Four automakers populate the list: Daimler (DDAIF), Honda (HMC), Nissan (NSANY), and Volkswagen (VWAGY). Why? Senior analysts Richard Hilgert and David Whiston explain in their 2020 Automotive Observer that few automakers can effectively carve out economic moats because of the ultra-competitive landscape.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Daimler AG88.61 USD1.78Rating
Honda Motor Co Ltd ADR31.47 USD1.68Rating
Huaneng Power International Inc ADR repr Class N20.62 USD-11.01
Nissan Motor Co Ltd ADR10.27 USD1.99Rating
PetroChina Co Ltd ADR50.02 USD2.46Rating
The Kraft Heinz Co36.84 USD1.24Rating
Volkswagen AG ADR32.12 USD2.33Rating
Volkswagen AG ADR22.36 USD0.61Rating

About Author

Susan Dziubinski

Susan Dziubinski  Susan Dziubinski is director of content for Morningstar.com.

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