Morningstar Advisor - August/September 2010 - 74

By the Numbers: Stocks

Undervalued Stocks With Wide Moats
Undervalued stocks with significant competitive advantages can make attractive long-term holdings. With that in mind, we scoured our 2,000-plus stock coverage universe for highquality stocks (those boasting wide economic moats) that are trading on the cheap (rated 4 or 5 stars by our analysts). Our analysts award wide economic moats to companies that they believe possess durable competitive advantages that are likely to confer economic profits well into the future. When a stock trades at a suitably wide discount to our estimate, we award it 4 or 5 stars. The wider the discount, the higher the star rating, and vice versa. There were 85 stocks that fit that profile as of June 30, 2010, 43 more than made the list April 30, 2010. The furious rally from the market’s March 2009 lows finally took a breather in the first half of 2010. Despite some signs that the United States was on track for a self-sustaining economic recovery, concerns about everything
Market Cap ($Mil) EPS TTM

from valuation levels to unemployment to the government debt burden kept stock prices in check. Sovereign debt concerns also reared their ugly head in the first half of the year. Although the market showed resilience through the first quarter, tacking on about 5%, it hit a rough patch in the spring, with the Morningstar US Market Index shedding about 7.17% during the trailing 13 weeks through June 29.

Name

Industry

P/E Ratio (trailing)

Revenue Growth % 3 Yr

EPS Dividend Yield ROE % Growth % % Current (trailing) 3 Yr

3M Company MMM Abbott Laboratories ABT Altria Group Inc. MO American Express Company AXP Amgen, Inc. AMGN Apollo Group, Inc. A APOL Applied Materials AMAT Autodesk, Inc. ADSK Automatic Data Processing ADP Avon Products AVP Bank of New York Mellon BK Blackrock, Inc. BLK Capella Education Company CPLA Cisco Systems, Inc. CSCO Coca-Cola Company KO Colgate-Palmolive Company CL Comcast Corporation A CMCSA Credit Suisse Group ADR CS DeVry, Inc. DV Diageo PLC ADR DEO Dun & Bradstreet Corporation DNB Eaton Vance Corporation EV eBay, Inc. EBAY Eli Lilly & Company LLY Equifax, Inc. EFX Exelon Corporation EXC Expeditors International of Washington, Inc. ExxonMobil Corporation XOM Federated Investors, Inc. B FII Fiserv, Inc. FISV Franklin Resources BEN General Dynamics GD General Electric Company GE Genzyme Corporation GENZ GlaxoSmithKline PLC ADR GSK

Diversified Drug Manufacturers - Major Cigarettes Credit Services Biotechnology Education & Training Services Semiconductor Equipment & Materials Technical & System Software Business Services Personal Products Asset Management Asset Management Education & Training Services Networking & Communication Devices Beverages - Soft Drinks Personal Products CATV Systems Money Center Banks Education & Training Services Beverages - Wineries & Distilleries Information & Delivery Services Asset Management Specialty Retail, Other Drug Manufacturers - Major Credit Services Diversified Utilities Air Delivery & Freight Services Major Integrated Oil & Gas Asset Management Business Services Asset Management Aerospace & Defense Products & Svcs Diversified Biotechnology Drug Manufacturers - Major

55,384 71,714 42,297 47,354 49,525 6,176 16,116 5,578 19,833 11,336 29,814 27,251 1,319 120,677 115,468 38,608 49,265 44,002 3,508 44,480 3,344 3,247 25,172 38,826 3,555 25,023 7,232 265,769 2,115 6,939 19,317 22,642 148,190 14,091 87,675

5.05 3.43 1.65 2.19 4.71 3.90 0.32 0.54 2.69 1.28 -0.95 7.85 2.91 1.18 3.04 4.09 1.30 5.57 3.40 2.42 5.02 1.32 1.85 3.87 1.84 4.14 1.12 4.40 2.04 3.19 6.00 6.18 0.92 0.41 2.25

15.63 13.64 12.11 18.15 11.16 10.56 37.59 44.84 15.04 20.66 — 18.25 28.01 18.05 16.47 19.23 13.37 6.30 15.46 16.21 13.23 20.92 10.60 8.65 15.17 9.17 30.86 12.95 9.62 14.43 14.37 9.43 14.08 123.46 10.12

0.29 11.03 -22.37 -0.41 0.87 17.06 -18.22 -2.34 9.06 6.16 4.06 30.85 22.99 8.24 8.76 7.79 12.72 -4.86 20.30 8.67 3.28 1.08 13.49 11.65 5.67 3.42 -4.06 -6.31 6.34 4.57 -6.01 9.95 1.07 12.32 6.87

-3.69 48.80 -35.39 -19.84 22.06 16.86 — -40.55 -0.63 11.01 — 16.44 33.29 5.67 10.70 21.11 16.84 -19.44 55.19 -0.96 17.42 -2.63 32.31 17.16 -4.79 20.29 1.55 -15.60 1.06 6.41 -7.31 10.60 -20.37 — 4.62

2.67 3.53 6.79 1.83 — — 2.08 — 3.42 3.25 1.46 2.49 — — 3.40 2.35 2.01 3.04 0.41 3.70 2.08 2.32 — 5.82 0.57 5.54 1.15 3.01 4.69 — 1.02 2.73 2.88 — 5.88

30.41 27.37 97.43 19.80 22.47 48.05 5.96 8.94 24.81 59.39 -4.10 6.61 28.61 17.05 31.11 102.07 8.87 18.60 24.37 39.53 — 49.55 19.25 46.90 15.69 21.48 15.97 19.16 47.63 16.96 19.09 20.83 9.10 1.50 61.29

74 Morningstar Advisor August/September 2010
Morningstar Advisor - August/September 2010

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