Morningstar Advisor - Winter 2008 - 88

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 high-quality 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 they believe possess durable competitive advantages that are likely to confer economic profits well into the future. Barriers to entry, switching costs, scale advantages, and patent protection are examples of such advantages. In addition, our analysts estimate the fair value of each stock based on in-depth fundamental analysis. When a stock trades at a suitably wide discount to our fair-value estimate, we award it 4 or 5 stars. The wider the discount, the higher the star rating, and vice versa. There were 101 stocks that fit that profile as of December 31, 2007. You might notice that the number of undervalued stocks with wide moats has risen significantly since our Fall 2007 issue, when there were only 69 qualified companies. This spike is largely due to the poor market performance during the fourth quarter. The S&P 500 lost 3.33% in Q4, making it the worst quarter for the index since Q3 of 2002. Poor market performance has led to a number of companies being undervalued compared with our fair value estimates. This represents a buying opportunity: Companies with strong competitive advantages that were previously too expensive have seen their prices come down to earth. Name Industry Market Cap ($Mil) EPS TTM P/E Ratio (trailing) Revenue Growth % 3 Yr EPS Growth % 3 Yr Dividend Yield % Current ROE % (trailing) Pg# 3M Company MMM Abbott Laboratories ABT Allied Irish Banks ADR AIB American Express Company AXP Amgen, Inc. AMGN Applied Materials AMAT ARM Holdings PLC ADR ARMHY AstraZeneca PLC ADR AZN Automatic Data Processing ADP Bank of America Corporation BAC Bank of Montreal BMO Barclays PLC ADR BCS Biogen Idec, Inc. BIIB Boardwalk Pipeline Partners LP BWP Boston Scientific, Inc. BSX British Sky Broadcasting Group ADR BSY Brown & Brown, Inc. BRO Buckeye GP Holdings L.P. Trust Unit BGH Buckeye Partners, L.P. BPL Cadbury Schweppes PLC ADR CSG Campbell Soup Company CPB Canadian Imperial Bank of Commerce CM Capital One Financial Corporation COF Central North Airport Group ADR OMAB Cintas Corporation CTAS Cisco Systems, Inc. CSCO Citigroup, Inc. C Comcast Corporation CMCSK Diversified Drugs International Banks Finance Biotechnology Semiconductor Equipment Semiconductors Drugs Data Processing International Banks International Banks International Banks Biotechnology Pipelines Medical Equipment Cable TV Insurance (General) Pipelines Pipelines Food Mfg. Food Mfg. International Banks Finance Air Transport Business Support Data Networking International Banks Cable TV 59,193 85,716 20,835 58,951 49,694 23,645 3,350 64,854 22,574 179,499 28,259 65,396 16,517 3,713 17,040 20,732 3,276 817 2,198 25,815 13,439 23,722 19,601 1,234 5,238 162,291 144,616 53,012 5.98 1.23 4.89 3.40 2.77 1.20 0.10 3.85 2.13 4.40 4.11 2.79 1.66 1.90 0.36 1.13 1.38 0.64 2.93 2.24 2.14 9.21 4.44 9.16 2.07 1.26 3.72 1.15 13.87 45.05 6.66 14.45 16.50 14.25 35.97 11.10 22.68 9.19 13.68 7.27 33.90 16.81 31.75 21.28 16.86 45.05 17.15 24.81 16.53 7.63 6.94 29.41 15.92 21.23 7.81 15.55 7.93 9.16 11.13 11.55 19.52 6.70 27.15 11.99 11.84 24.42 0.00 20.28 58.08 — 31.04 7.57 16.80 19.16 19.16 4.86 — 0.82 13.83 11.90 9.62 16.57 4.99 12.94 18.77 -13.82 47.71 9.14 13.64 15.44 35.02 29.57 20.02 8.74 -2.39 18.36 — — — 19.32 15.10 — 35.98 45.63 11.22 18.53 16.25 34.52 10.72 23.58 8.01 -5.96 2.31 2.29 4.46 1.25 — 1.35 1.01 4.09 2.28 5.93 4.46 6.42 — 5.43 — 2.64 1.07 3.39 6.41 2.39 2.40 4.39 0.23 1.45 1.18 — 7.44 — 40.30 12.35 29.14 37.65 18.72 23.63 7.38 41.82 23.58 14.78 14.04 20.05 10.93 — 1.55 594.05 18.23 — — 34.66 55.35 31.24 7.00 6.03 14.73 23.41 14.64 5.67 32 72 73 32 32 32 32 88 Morningstar Advisor Winter 2008

Morningstar Advisor - Winter 2008

Table of Contents for the Digital Edition of Morningstar Advisor - Winter 2008

Morningstar Advisor - Winter 2008
Contents
Letter from the Editor
Inbox
How Do You Use the Morningstar Style Box?
Real Estate Investing Goes Global
The Golden Touch
Investment Briefs
Learning to Fly with Equity Options
Another Block in Building a Portfolio
In a League of Their Own
Unlock the Box
Fashion Change
The View from the Investment Side
Unpredictable Style
Weighting the Fundamentals
Wire-to-Wire Consistency
The Secret's Out
Focus on Financials
Strongest Homebuilders Will Withstand the Wrecking Ball
Breaking Style Conventions
Playing It Safe with Financials
Back to Bond School
Mutual Fund Analyst Picks
Undervalued Stocks
Most Popular Variable Annuities
New at Morningstar
The Style Counsel
Morningstar Advisor - Winter 2008 - Intro
Morningstar Advisor - Winter 2008 - Morningstar Advisor - Winter 2008
Morningstar Advisor - Winter 2008 - Cover2
Morningstar Advisor - Winter 2008 - 1
Morningstar Advisor - Winter 2008 - 2
Morningstar Advisor - Winter 2008 - Contents
Morningstar Advisor - Winter 2008 - 4
Morningstar Advisor - Winter 2008 - 5
Morningstar Advisor - Winter 2008 - 6
Morningstar Advisor - Winter 2008 - Letter from the Editor
Morningstar Advisor - Winter 2008 - 8
Morningstar Advisor - Winter 2008 - Inbox
Morningstar Advisor - Winter 2008 - How Do You Use the Morningstar Style Box?
Morningstar Advisor - Winter 2008 - 11
Morningstar Advisor - Winter 2008 - Real Estate Investing Goes Global
Morningstar Advisor - Winter 2008 - 13
Morningstar Advisor - Winter 2008 - 14
Morningstar Advisor - Winter 2008 - The Golden Touch
Morningstar Advisor - Winter 2008 - 16
Morningstar Advisor - Winter 2008 - 17
Morningstar Advisor - Winter 2008 - Investment Briefs
Morningstar Advisor - Winter 2008 - 19
Morningstar Advisor - Winter 2008 - 20
Morningstar Advisor - Winter 2008 - 21
Morningstar Advisor - Winter 2008 - Learning to Fly with Equity Options
Morningstar Advisor - Winter 2008 - 23
Morningstar Advisor - Winter 2008 - 24
Morningstar Advisor - Winter 2008 - 25
Morningstar Advisor - Winter 2008 - Another Block in Building a Portfolio
Morningstar Advisor - Winter 2008 - 27
Morningstar Advisor - Winter 2008 - 28
Morningstar Advisor - Winter 2008 - 29
Morningstar Advisor - Winter 2008 - In a League of Their Own
Morningstar Advisor - Winter 2008 - 31
Morningstar Advisor - Winter 2008 - 32
Morningstar Advisor - Winter 2008 - 33
Morningstar Advisor - Winter 2008 - 34
Morningstar Advisor - Winter 2008 - 35
Morningstar Advisor - Winter 2008 - Unlock the Box
Morningstar Advisor - Winter 2008 - 37
Morningstar Advisor - Winter 2008 - 38
Morningstar Advisor - Winter 2008 - 39
Morningstar Advisor - Winter 2008 - Fashion Change
Morningstar Advisor - Winter 2008 - 41
Morningstar Advisor - Winter 2008 - 42
Morningstar Advisor - Winter 2008 - 43
Morningstar Advisor - Winter 2008 - The View from the Investment Side
Morningstar Advisor - Winter 2008 - 45
Morningstar Advisor - Winter 2008 - 46
Morningstar Advisor - Winter 2008 - 47
Morningstar Advisor - Winter 2008 - 48
Morningstar Advisor - Winter 2008 - 49
Morningstar Advisor - Winter 2008 - 50
Morningstar Advisor - Winter 2008 - 51
Morningstar Advisor - Winter 2008 - Unpredictable Style
Morningstar Advisor - Winter 2008 - 53
Morningstar Advisor - Winter 2008 - Weighting the Fundamentals
Morningstar Advisor - Winter 2008 - 55
Morningstar Advisor - Winter 2008 - 56
Morningstar Advisor - Winter 2008 - 57
Morningstar Advisor - Winter 2008 - 58
Morningstar Advisor - Winter 2008 - 59
Morningstar Advisor - Winter 2008 - 60
Morningstar Advisor - Winter 2008 - 61
Morningstar Advisor - Winter 2008 - Wire-to-Wire Consistency
Morningstar Advisor - Winter 2008 - 63
Morningstar Advisor - Winter 2008 - 64
Morningstar Advisor - Winter 2008 - 65
Morningstar Advisor - Winter 2008 - The Secret's Out
Morningstar Advisor - Winter 2008 - 67
Morningstar Advisor - Winter 2008 - 68
Morningstar Advisor - Winter 2008 - 69
Morningstar Advisor - Winter 2008 - Focus on Financials
Morningstar Advisor - Winter 2008 - 71
Morningstar Advisor - Winter 2008 - 72
Morningstar Advisor - Winter 2008 - 73
Morningstar Advisor - Winter 2008 - Strongest Homebuilders Will Withstand the Wrecking Ball
Morningstar Advisor - Winter 2008 - 75
Morningstar Advisor - Winter 2008 - Breaking Style Conventions
Morningstar Advisor - Winter 2008 - 77
Morningstar Advisor - Winter 2008 - Playing It Safe with Financials
Morningstar Advisor - Winter 2008 - 79
Morningstar Advisor - Winter 2008 - 80
Morningstar Advisor - Winter 2008 - Back to Bond School
Morningstar Advisor - Winter 2008 - 82
Morningstar Advisor - Winter 2008 - Mutual Fund Analyst Picks
Morningstar Advisor - Winter 2008 - 84
Morningstar Advisor - Winter 2008 - 85
Morningstar Advisor - Winter 2008 - 86
Morningstar Advisor - Winter 2008 - 87
Morningstar Advisor - Winter 2008 - Undervalued Stocks
Morningstar Advisor - Winter 2008 - 89
Morningstar Advisor - Winter 2008 - 90
Morningstar Advisor - Winter 2008 - 91
Morningstar Advisor - Winter 2008 - Most Popular Variable Annuities
Morningstar Advisor - Winter 2008 - 93
Morningstar Advisor - Winter 2008 - New at Morningstar
Morningstar Advisor - Winter 2008 - 95
Morningstar Advisor - Winter 2008 - The Style Counsel
Morningstar Advisor - Winter 2008 - Cover3
Morningstar Advisor - Winter 2008 - Cover4
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