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

Table of Contents for the Digital Edition of Morningstar Advisor - August/September 2010

Morningstar Advisor - August/September 2010
Contents
New on MorningstarAdvisor.com
Contributors
Letter From the Editor
What Aspects of Health-Care Reform Will Most Affect Your Clients?
Bonds, Chicago Style
Investment Briefs
Which Risk Are You Managing?
Eye on the Prize
Advisors Can’t Rely on Fidelity Alone
Health Care Gets Back to Business
An Opportune Time to Bet the Pharm
Reform’s Impact on Other Health-Care Industries
Top Takeover Targets in Biotech
After Reform, Narrow-Moat Firms Have Strong Prospects in Diagnostics
Health-Care Investing Alive and Well
Quest for Knowledge
Four Picks for the Present
How to Make Your Bond Portfolio Inflation-Resistant
Weeding Through the Energy Patch
Uncertainty and Value in Basic Materials
Stock Market Doom-Busters
Hunting Down European Debt-Dodgers
Mutual Fund Analyst Picks
50 Most Popular Equity ETFs
Undervalued Stocks With Wide Moats
VA Sales Slip a Bit in First Quarter
New at Morningstar
Star Wars, the Sequel
Morningstar Advisor - August/September 2010 - Morningstar Advisor - August/September 2010
Morningstar Advisor - August/September 2010 - Cover2
Morningstar Advisor - August/September 2010 - 1
Morningstar Advisor - August/September 2010 - 2
Morningstar Advisor - August/September 2010 - Contents
Morningstar Advisor - August/September 2010 - 4
Morningstar Advisor - August/September 2010 - 5
Morningstar Advisor - August/September 2010 - New on MorningstarAdvisor.com
Morningstar Advisor - August/September 2010 - 7
Morningstar Advisor - August/September 2010 - Contributors
Morningstar Advisor - August/September 2010 - Letter From the Editor
Morningstar Advisor - August/September 2010 - What Aspects of Health-Care Reform Will Most Affect Your Clients?
Morningstar Advisor - August/September 2010 - 11
Morningstar Advisor - August/September 2010 - Bonds, Chicago Style
Morningstar Advisor - August/September 2010 - 13
Morningstar Advisor - August/September 2010 - Investment Briefs
Morningstar Advisor - August/September 2010 - 15
Morningstar Advisor - August/September 2010 - Which Risk Are You Managing?
Morningstar Advisor - August/September 2010 - 17
Morningstar Advisor - August/September 2010 - 18
Morningstar Advisor - August/September 2010 - Eye on the Prize
Morningstar Advisor - August/September 2010 - 20
Morningstar Advisor - August/September 2010 - 21
Morningstar Advisor - August/September 2010 - Advisors Can’t Rely on Fidelity Alone
Morningstar Advisor - August/September 2010 - 23
Morningstar Advisor - August/September 2010 - 24
Morningstar Advisor - August/September 2010 - 25
Morningstar Advisor - August/September 2010 - 26
Morningstar Advisor - August/September 2010 - Health Care Gets Back to Business
Morningstar Advisor - August/September 2010 - An Opportune Time to Bet the Pharm
Morningstar Advisor - August/September 2010 - 29
Morningstar Advisor - August/September 2010 - Reform’s Impact on Other Health-Care Industries
Morningstar Advisor - August/September 2010 - 31
Morningstar Advisor - August/September 2010 - 32
Morningstar Advisor - August/September 2010 - Top Takeover Targets in Biotech
Morningstar Advisor - August/September 2010 - 34
Morningstar Advisor - August/September 2010 - 35
Morningstar Advisor - August/September 2010 - After Reform, Narrow-Moat Firms Have Strong Prospects in Diagnostics
Morningstar Advisor - August/September 2010 - 37
Morningstar Advisor - August/September 2010 - 38
Morningstar Advisor - August/September 2010 - 39
Morningstar Advisor - August/September 2010 - 40
Morningstar Advisor - August/September 2010 - Health-Care Investing Alive and Well
Morningstar Advisor - August/September 2010 - 42
Morningstar Advisor - August/September 2010 - 43
Morningstar Advisor - August/September 2010 - 44
Morningstar Advisor - August/September 2010 - 45
Morningstar Advisor - August/September 2010 - 46
Morningstar Advisor - August/September 2010 - 47
Morningstar Advisor - August/September 2010 - 48
Morningstar Advisor - August/September 2010 - Quest for Knowledge
Morningstar Advisor - August/September 2010 - 50
Morningstar Advisor - August/September 2010 - 51
Morningstar Advisor - August/September 2010 - Four Picks for the Present
Morningstar Advisor - August/September 2010 - 53
Morningstar Advisor - August/September 2010 - How to Make Your Bond Portfolio Inflation-Resistant
Morningstar Advisor - August/September 2010 - 55
Morningstar Advisor - August/September 2010 - 56
Morningstar Advisor - August/September 2010 - 57
Morningstar Advisor - August/September 2010 - Weeding Through the Energy Patch
Morningstar Advisor - August/September 2010 - 59
Morningstar Advisor - August/September 2010 - 60
Morningstar Advisor - August/September 2010 - Uncertainty and Value in Basic Materials
Morningstar Advisor - August/September 2010 - 62
Morningstar Advisor - August/September 2010 - 63
Morningstar Advisor - August/September 2010 - Stock Market Doom-Busters
Morningstar Advisor - August/September 2010 - 65
Morningstar Advisor - August/September 2010 - Hunting Down European Debt-Dodgers
Morningstar Advisor - August/September 2010 - 67
Morningstar Advisor - August/September 2010 - Mutual Fund Analyst Picks
Morningstar Advisor - August/September 2010 - 69
Morningstar Advisor - August/September 2010 - 70
Morningstar Advisor - August/September 2010 - 71
Morningstar Advisor - August/September 2010 - 50 Most Popular Equity ETFs
Morningstar Advisor - August/September 2010 - 73
Morningstar Advisor - August/September 2010 - Undervalued Stocks With Wide Moats
Morningstar Advisor - August/September 2010 - 75
Morningstar Advisor - August/September 2010 - VA Sales Slip a Bit in First Quarter
Morningstar Advisor - August/September 2010 - 77
Morningstar Advisor - August/September 2010 - 78
Morningstar Advisor - August/September 2010 - New at Morningstar
Morningstar Advisor - August/September 2010 - Star Wars, the Sequel
Morningstar Advisor - August/September 2010 - Cover3
Morningstar Advisor - August/September 2010 - Cover4
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