Morningstar Advisor - April/May 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. 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 estimate, we award it 4 or 5 stars. The wider the discount, the higher the star rating, and vice versa. There were 60 stocks that fit that profile as of Feb. 28, 2010, 10 more than made the list Dec. 31, 2009.
Name Industry

It’s hard to believe that it has been almost two years since Bear Stearns was forced into J.P. Morgan’s JPM hands and that the furious market rally is now one year old. Despite the fits and starts of the economic recovery, stocks have continued their march upward. Although the cause of the economic malaise behind the stock market swoon is complex, the housing market bust and subsequent credit crisis obviously played central roles. Bank stocks were some of the hardest hit during the bear market, as investors worried about everything from liquidity to credit losses to bank nationalization. As the veil of uncertainty has lifted over the banking sector, financial-services stocks have seen the biggest uptick of any sector. The best
Market Cap ($Mil) EPS TTM

performers have been firms once left for dead, such as Citigroup C, that have rebounded nicely. Toward the bottom of the return spectrum are health-care stocks. Although traditionally health care is considered a safe haven during a recession, the story has been very different this time. Concerns about the impact of reform on the industry have kept many investors away and muted returns. Telecommunication, energy, and utility stocks also had a relatively rough go of it in the past year as lower demand and falling commodity prices squeezed results.

P/E Ratio (trailing)

Revenue Growth % 3 Yr

EPS Growth % 3 Yr

Dividend Yield % Current

ROE % (trailing)

Abbott Laboratories ABT Altria Group Inc. MO American Express Company AXP Apollo Group, Inc. A APOL Applied Materials AMAT AstraZeneca PLC ADR AZN Automatic Data Processing ADP Bank of New York Mellon Corporation BK CH Robinson Worldwide, Inc. CHRW Comcast Corporation CMCSK Corporate Executive Board Company EXBD DeVry, Inc. DV Diageo PLC ADR DEO Dun & Bradstreet Corporation DNB eBay, Inc. EBAY Eli Lilly & Company LLY Enterprise GP Holdings L.P. EPE Equifax, Inc. EFX Exelon Corporation EXC Expeditors International of Washington, Inc. EXPD ExxonMobil Corporation XOM Federated Investors, Inc. B FII Fiserv, Inc. FISV Forward Air Corporation FWRD General Electric Company GE

Drug Manufacturers - Major Cigarettes Credit Services Education & Training Services Semicond. Equipment & Materials Drug Manufacturers - Major Business Services Money Center Banks Air Delivery & Freight Services CATV Systems Management Services Education & Training Services Beverages - Wineries & Distilleries Information & Delivery Services Specialty Retail, Other Drug Manufacturers - Major Oil & Gas Refining & Marketing Credit Services Diversified Utilities Air Delivery & Freight Services Major Integrated Oil & Gas Asset Management Business Services Trucking Diversified

84,293 42,172 45,451 9,293 16,766 63,698 21,188 34,337 8,984 44,947 793 4,495 46,342 3,581 31,020 39,576 5,822 4,127 29,339 7,709 309,146 2,585 7,450 719 169,650

3.69 1.53 1.42 3.75 -0.23 5.00 2.66 -1.65 2.13 1.07 0.94 2.56 2.60 6.26 1.08 -0.20 1.15 1.86 4.29 1.15 4.33 1.99 2.69 0.41 1.08

14.73 13.07 25.25 14.58 — 9.33 15.38 — 26.60 14.14 26.74 23.81 15.72 12.52 21.28 — 34.01 17.21 10.72 29.67 14.97 12.61 16.92 57.80 14.56

11.03 -13.16 -0.41 17.06 -18.22 9.68 9.06 4.06 14.67 12.72 15.52 20.30 8.67 3.28 13.49 11.65 19.36 5.67 3.42 -4.06 -6.31 6.34 4.57 5.77 1.07

48.80 -35.39 -19.84 16.86 — 13.01 -0.63 — 21.49 16.84 -6.83 55.19 -0.96 17.42 32.31 17.16 13.90 -4.79 20.29 1.55 -15.60 1.06 6.41 -39.69 -20.37

2.95 6.51 1.89 — 1.92 5.23 3.17 1.27 1.81 1.88 3.18 0.28 3.45 1.95 — 5.71 4.85 0.49 4.72 1.05 2.57 3.82 — 1.13 2.52

28.24 80.01 12.50 52.92 -4.20 40.65 25.48 -6.92 32.63 7.50 67.68 20.89 43.48 — 11.95 -1.83 — 15.91 23.53 17.45 18.10 45.09 14.77 5.55 9.95

74 Morningstar Advisor April/May 2010



Morningstar Advisor - April/May 2010

Table of Contents for the Digital Edition of Morningstar Advisor - April/May 2010

Morningstar Advisor - April/May 2010
Contents
New On MorningstarAdvisor.com
Contributors
Letter from the Editor
Our Job: Building Better Investors
What’s Your Biggest Long-term Concern for the Economy?
An Early Start
Women’s Work
Investment Briefs
Markowitz 2.0
Asset Allocation Is King
A Decade of Riskier Assets ...
... but with plenty of Silver Linings
Be Prepared
Facing up to the Economy’s Problems
Levelheaded
Surviving on Conviction
Four Picks for the Present
Pharmaceutical Firms Get the Urge to Merge
Funds That Look Cheaper Than the Market
Finding Dividend Leaders
Mutual Fund Analyst Picks
50 Most Popular ETFs
Undervalued Stocks with Wide Moats
VAs: Assets Rise as New Sales Slip
New at Morningstar
When You Wish Upon a Star
Morningstar Advisor - April/May 2010 - Morningstar Advisor - April/May 2010
Morningstar Advisor - April/May 2010 - Cover2
Morningstar Advisor - April/May 2010 - 1
Morningstar Advisor - April/May 2010 - 2
Morningstar Advisor - April/May 2010 - Contents
Morningstar Advisor - April/May 2010 - 4
Morningstar Advisor - April/May 2010 - 5
Morningstar Advisor - April/May 2010 - New On MorningstarAdvisor.com
Morningstar Advisor - April/May 2010 - 7
Morningstar Advisor - April/May 2010 - Contributors
Morningstar Advisor - April/May 2010 - Letter from the Editor
Morningstar Advisor - April/May 2010 - 10
Morningstar Advisor - April/May 2010 - Our Job: Building Better Investors
Morningstar Advisor - April/May 2010 - 12
Morningstar Advisor - April/May 2010 - 13
Morningstar Advisor - April/May 2010 - What’s Your Biggest Long-term Concern for the Economy?
Morningstar Advisor - April/May 2010 - 15
Morningstar Advisor - April/May 2010 - An Early Start
Morningstar Advisor - April/May 2010 - 17
Morningstar Advisor - April/May 2010 - Women’s Work
Morningstar Advisor - April/May 2010 - 19
Morningstar Advisor - April/May 2010 - Investment Briefs
Morningstar Advisor - April/May 2010 - 21
Morningstar Advisor - April/May 2010 - Markowitz 2.0
Morningstar Advisor - April/May 2010 - 23
Morningstar Advisor - April/May 2010 - 24
Morningstar Advisor - April/May 2010 - 25
Morningstar Advisor - April/May 2010 - 26
Morningstar Advisor - April/May 2010 - 27
Morningstar Advisor - April/May 2010 - Asset Allocation Is King
Morningstar Advisor - April/May 2010 - 29
Morningstar Advisor - April/May 2010 - 30
Morningstar Advisor - April/May 2010 - 31
Morningstar Advisor - April/May 2010 - 32
Morningstar Advisor - April/May 2010 - 33
Morningstar Advisor - April/May 2010 - A Decade of Riskier Assets ...
Morningstar Advisor - April/May 2010 - ... but with plenty of Silver Linings
Morningstar Advisor - April/May 2010 - 36
Morningstar Advisor - April/May 2010 - Be Prepared
Morningstar Advisor - April/May 2010 - 38
Morningstar Advisor - April/May 2010 - 39
Morningstar Advisor - April/May 2010 - 40
Morningstar Advisor - April/May 2010 - 41
Morningstar Advisor - April/May 2010 - 42
Morningstar Advisor - April/May 2010 - 43
Morningstar Advisor - April/May 2010 - Facing up to the Economy’s Problems
Morningstar Advisor - April/May 2010 - 45
Morningstar Advisor - April/May 2010 - 46
Morningstar Advisor - April/May 2010 - 47
Morningstar Advisor - April/May 2010 - 48
Morningstar Advisor - April/May 2010 - 49
Morningstar Advisor - April/May 2010 - Levelheaded
Morningstar Advisor - April/May 2010 - 51
Morningstar Advisor - April/May 2010 - 52
Morningstar Advisor - April/May 2010 - 53
Morningstar Advisor - April/May 2010 - Surviving on Conviction
Morningstar Advisor - April/May 2010 - 55
Morningstar Advisor - April/May 2010 - 56
Morningstar Advisor - April/May 2010 - 57
Morningstar Advisor - April/May 2010 - Four Picks for the Present
Morningstar Advisor - April/May 2010 - 59
Morningstar Advisor - April/May 2010 - 60
Morningstar Advisor - April/May 2010 - Pharmaceutical Firms Get the Urge to Merge
Morningstar Advisor - April/May 2010 - 62
Morningstar Advisor - April/May 2010 - 63
Morningstar Advisor - April/May 2010 - Funds That Look Cheaper Than the Market
Morningstar Advisor - April/May 2010 - 65
Morningstar Advisor - April/May 2010 - Finding Dividend Leaders
Morningstar Advisor - April/May 2010 - 67
Morningstar Advisor - April/May 2010 - Mutual Fund Analyst Picks
Morningstar Advisor - April/May 2010 - 69
Morningstar Advisor - April/May 2010 - 70
Morningstar Advisor - April/May 2010 - 71
Morningstar Advisor - April/May 2010 - 50 Most Popular ETFs
Morningstar Advisor - April/May 2010 - 73
Morningstar Advisor - April/May 2010 - Undervalued Stocks with Wide Moats
Morningstar Advisor - April/May 2010 - 75
Morningstar Advisor - April/May 2010 - VAs: Assets Rise as New Sales Slip
Morningstar Advisor - April/May 2010 - 77
Morningstar Advisor - April/May 2010 - 78
Morningstar Advisor - April/May 2010 - New at Morningstar
Morningstar Advisor - April/May 2010 - When You Wish Upon a Star
Morningstar Advisor - April/May 2010 - Cover3
Morningstar Advisor - April/May 2010 - Cover4
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