Morningstar Advisor - October/November 2010 - 76

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 75 stocks that fit that profile as of Aug. 31, 2010, 10 fewer than made the list on June 30, 2010. In the ongoing battle between the rose-colored glasses camp, who anticipated a near normal recovery, and the doom-and-gloomers who deny we ever came out of the recession, the optimists managed to tie up the score in early SepMarket Cap ($Mil) EPS TTM

tember. Using a longer-distance lens and looking at year-to-date results, the current recovery appears a lot steadier, albeit slower-growing than widely perceived. The interpretation of a stunning March and April will likely remain an open question. Was it a mirage, a severe case of cabin fever following a miserable winter, or a statistical error that will be reversed down the road? Was it a real recovery sidetracked by the European debt crisis and May’s flash crash? The remaining year could tell the tale.

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 AllianceBernstein Holding L.P. AB Amgen, Inc. AMGN Apollo Group, Inc. A APOL Applied Materials AMAT Automatic Data Processing ADP Avon Products AVP Bank of New York Mellon BK BlackRock, Inc. BLK Boston Scientific, Inc. BSX Capella Education Company CPLA Cisco Systems, Inc. CSCO Colgate-Palmolive Company CL Comcast Corporation CMCSK DeVry, Inc. DV Dun & Bradstreet Corporation DNB eBay, Inc. EBAY Eli Lilly and Company LLY Equifax, Inc. EFX Exelon Corporation EXC ExxonMobil Corporation XOM Fiserv, Inc. FISV Forward Air Corporation FWRD Franklin Resources BEN General Dynamics GD General Electric Company GE GlaxoSmithKline PLC ADR GSK Graco Incorporated GGG Grand Canyon Education, Inc. LOPE Harley-Davidson, Inc. HOG Home Depot, Inc. HD Intel Corporation INTC International Game Tech. IGT International Speedway Corporation A ISCA

Diversified Drug Manufacturers - Major Asset Management Biotechnology Education & Training Services Semiconductor Equipment & Materials Business Services Personal Products Asset Management Asset Management Medical Instruments & Supplies Education & Training Services Networking & Communication Devices Personal Products CATV Systems Education & Training Services Business Services Specialty Retail, Other Drug Manufacturers - Major Business Services Diversified Utilities Major Integrated Oil & Gas Business Services Trucking Asset Management Aerospace & Defense Products & Svcs Diversified Drug Manufacturers - Major Diversified Machinery Education & Training Services Recreational Vehicles Home Improvement Stores Semiconductor - Broad Line Gaming Activities Sporting Activities

57,771 77,618 2,494 50,406 6,401 14,383 19,371 12,573 30,497 28,070 7,782 1,058 115,708 36,411 47,403 2,797 3,354 31,531 39,437 3,779 27,537 310,142 7,753 721 22,590 21,978 160,475 100,652 1,735 780 6,033 48,176 101,004 4,501 1,121

5.48 3.43 2.04 4.71 3.90 0.32 2.40 1.48 -0.30 8.44 -1.76 3.20 1.18 4.19 1.28 3.87 4.68 1.90 4.04 1.94 3.82 5.20 3.12 0.74 6.30 6.25 0.96 1.56 1.32 0.84 -0.37 1.70 1.67 0.54 1.01

14.35 14.39 11.63 10.85 10.94 32.36 16.08 19.69 — 16.84 — 19.49 16.92 17.61 12.58 9.85 13.93 12.21 8.31 15.77 10.67 11.38 15.24 32.26 15.31 8.90 13.55 15.58 21.19 20.41 48.54 16.61 10.57 24.33 22.57

0.29 11.03 -18.79 0.87 17.06 -18.22 4.60 6.16 4.06 30.85 1.54 22.99 8.24 7.79 12.72 27.07 3.28 13.49 11.65 5.67 3.42 -6.31 4.57 5.77 -6.01 9.95 1.07 6.87 -10.81 53.71 -6.24 -5.74 -0.24 -5.58 -4.60

-3.69 48.80 -22.18 22.06 16.86 — 5.57 11.01 — 16.44 — 33.29 5.67 21.11 16.84 53.50 17.42 32.31 17.16 -4.79 20.29 -15.60 6.41 -39.69 -7.31 10.60 -20.37 4.62 -28.00 — — -17.44 -3.62 -27.53 -60.02

2.57 3.34 8.44 — — 2.43 3.43 2.97 1.43 2.58 — — — 2.59 2.08 0.51 2.07 — 5.73 0.53 5.04 2.82 — 1.13 0.87 2.77 2.66 5.11 2.74 — 1.56 3.26 3.38 1.59 0.69

31.83 26.71 — 21.05 49.72 5.96 22.43 60.79 -1.27 7.58 -21.89 29.76 17.05 90.19 8.57 26.58 — 19.27 47.37 15.79 19.99 19.97 16.15 9.49 19.50 20.39 9.08 48.54 38.77 45.99 -4.00 15.37 22.30 14.54 4.29

76 Morningstar Advisor October/November 2010



Morningstar Advisor - October/November 2010

Table of Contents for the Digital Edition of Morningstar Advisor - October/November 2010

Morningstar Advisor - October/November 2010
Contents
New on MorningstarAdvisor.com
Contributors
Letter From the Editor
What estate-planning strategies are you and your clients doing before the end of the year?
Next Steps for ETFs
Investment Briefs
Taking It Personal
A Model Practice
Find the Right Fit
Will REITs Put You in the Penthouse?
Prepare for the Worst
Tips for Common Family Situations
Might Makes Right
Built to Last
Four Picks for the Present
Tactical Strategies Miss Their Mark
Time to Hop on the Commodities Bandwagon?
Retailers Balance Caution and Catalysts
In Search of … Recession Survivors
Turmoil-Tested Small-Cap Funds
Mutual Fund Analyst Picks
50 Most Popular ETFs
Undervalued Stocks With Wide Moats
VA Sales Rise in Second Quarter
The Third Rail
Morningstar Advisor - October/November 2010 - Intro
Morningstar Advisor - October/November 2010 - Morningstar Advisor - October/November 2010
Morningstar Advisor - October/November 2010 - Cover2
Morningstar Advisor - October/November 2010 - 1
Morningstar Advisor - October/November 2010 - 2
Morningstar Advisor - October/November 2010 - Contents
Morningstar Advisor - October/November 2010 - 4
Morningstar Advisor - October/November 2010 - 5
Morningstar Advisor - October/November 2010 - New on MorningstarAdvisor.com
Morningstar Advisor - October/November 2010 - 7
Morningstar Advisor - October/November 2010 - Contributors
Morningstar Advisor - October/November 2010 - Letter From the Editor
Morningstar Advisor - October/November 2010 - What estate-planning strategies are you and your clients doing before the end of the year?
Morningstar Advisor - October/November 2010 - 11
Morningstar Advisor - October/November 2010 - Next Steps for ETFs
Morningstar Advisor - October/November 2010 - 13
Morningstar Advisor - October/November 2010 - Investment Briefs
Morningstar Advisor - October/November 2010 - 15
Morningstar Advisor - October/November 2010 - 16
Morningstar Advisor - October/November 2010 - 17
Morningstar Advisor - October/November 2010 - Taking It Personal
Morningstar Advisor - October/November 2010 - 19
Morningstar Advisor - October/November 2010 - A Model Practice
Morningstar Advisor - October/November 2010 - 21
Morningstar Advisor - October/November 2010 - Find the Right Fit
Morningstar Advisor - October/November 2010 - 23
Morningstar Advisor - October/November 2010 - 24
Morningstar Advisor - October/November 2010 - 25
Morningstar Advisor - October/November 2010 - Will REITs Put You in the Penthouse?
Morningstar Advisor - October/November 2010 - 27
Morningstar Advisor - October/November 2010 - 28
Morningstar Advisor - October/November 2010 - 29
Morningstar Advisor - October/November 2010 - 30
Morningstar Advisor - October/November 2010 - 31
Morningstar Advisor - October/November 2010 - Prepare for the Worst
Morningstar Advisor - October/November 2010 - 33
Morningstar Advisor - October/November 2010 - 34
Morningstar Advisor - October/November 2010 - 35
Morningstar Advisor - October/November 2010 - Tips for Common Family Situations
Morningstar Advisor - October/November 2010 - 37
Morningstar Advisor - October/November 2010 - Might Makes Right
Morningstar Advisor - October/November 2010 - 39
Morningstar Advisor - October/November 2010 - 40
Morningstar Advisor - October/November 2010 - 41
Morningstar Advisor - October/November 2010 - 42
Morningstar Advisor - October/November 2010 - 43
Morningstar Advisor - October/November 2010 - 44
Morningstar Advisor - October/November 2010 - 45
Morningstar Advisor - October/November 2010 - Built to Last
Morningstar Advisor - October/November 2010 - 47
Morningstar Advisor - October/November 2010 - 48
Morningstar Advisor - October/November 2010 - 49
Morningstar Advisor - October/November 2010 - Four Picks for the Present
Morningstar Advisor - October/November 2010 - 51
Morningstar Advisor - October/November 2010 - Tactical Strategies Miss Their Mark
Morningstar Advisor - October/November 2010 - 53
Morningstar Advisor - October/November 2010 - 54
Morningstar Advisor - October/November 2010 - 55
Morningstar Advisor - October/November 2010 - 56
Morningstar Advisor - October/November 2010 - 57
Morningstar Advisor - October/November 2010 - Time to Hop on the Commodities Bandwagon?
Morningstar Advisor - October/November 2010 - 59
Morningstar Advisor - October/November 2010 - 60
Morningstar Advisor - October/November 2010 - Retailers Balance Caution and Catalysts
Morningstar Advisor - October/November 2010 - 62
Morningstar Advisor - October/November 2010 - 63
Morningstar Advisor - October/November 2010 - 64
Morningstar Advisor - October/November 2010 - 65
Morningstar Advisor - October/November 2010 - In Search of … Recession Survivors
Morningstar Advisor - October/November 2010 - 67
Morningstar Advisor - October/November 2010 - Turmoil-Tested Small-Cap Funds
Morningstar Advisor - October/November 2010 - 69
Morningstar Advisor - October/November 2010 - Mutual Fund Analyst Picks
Morningstar Advisor - October/November 2010 - 71
Morningstar Advisor - October/November 2010 - 72
Morningstar Advisor - October/November 2010 - 73
Morningstar Advisor - October/November 2010 - 50 Most Popular ETFs
Morningstar Advisor - October/November 2010 - 75
Morningstar Advisor - October/November 2010 - Undervalued Stocks With Wide Moats
Morningstar Advisor - October/November 2010 - 77
Morningstar Advisor - October/November 2010 - VA Sales Rise in Second Quarter
Morningstar Advisor - October/November 2010 - 79
Morningstar Advisor - October/November 2010 - The Third Rail
Morningstar Advisor - October/November 2010 - Cover3
Morningstar Advisor - October/November 2010 - Cover4
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