These undervalued wide-moat stocks earn low uncertainty ratings.
Stock investors have experienced quite the roller-coaster
ride during the past week or so. Technology stocks took it on the chin. Tesla
(TSLA) plummeted. And the Nasdaq sank 10% in just three trading days, putting
it in correction territory.
Buckle up, investors: Market uncertainty will likely persist
in the coming weeks, thanks to the pandemic, economic downturn, and upcoming
election.
Given the uncertainty in the market, we went looking for
stocks that we felt relatively certain about--they're high-quality and we
expect them to remain so, we have high confidence in our fair value estimates
of these names, and they're undervalued.
Specifically we screened for the following:
Wide moats: Firms with wide Morningstar Economic Moat
Ratings have unmatched advantages that should allow them to fend off their
competitors and outearn their costs of capital for the next 20 years. By their
very natures, wide-moat companies are reliable in terms of their
businesses--think of them as "steady Eddies."
Stable or positive moat trends: To qualify, a company needs
to be maintaining or growing its competitive advantages, not facing
impossible-to-overcome headwinds that may ultimately threaten its moat.
Low uncertainty: Such companies enjoy sales predictability, modest
operating and financial leverage, and limited exposure to contingent events. As
a result of these factors, we can more confidently estimate the future cash
flows of these companies and therefore have high confidence in our fair value
estimates.
Lastly, we focused only on those names trading in 4- and
5-star range, ensuring that there's a significant margin of safety.
Four stocks made the cut as of this writing. Here's a little
bit from our analysts about each business.
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