Stocks that Always Outperform the Rest of the Market

Companies with an economic moat, or competitive advantage over their peers, routinely outpeform over the long term - and if you add a value bias you are onto a winner

Michael Holt, CFA 3 June, 2015 | 2:03PM

In 2007, Morningstar created the Wide Moat Focus Index based on the 20 most undervalued wide-moat stocks in our US equity coverage universe. To construct the Wide Moat Focus Index, we start with all U.S.-based and U.S.-traded corporations with a wide moat rating.

We then sort on market price relative to Morningstar fair value estimates and include the 20 securities trading at the largest discount to fair value. These holdings are weighted equally, and the index is rebalanced and reconstituted quarterly.

Based on actual moat ratings assigned starting in 2002, Morningstar was able to create hypothetical results going back to late 2002. For 2007 to the present, the results are based on the index's actual performance. Since inception, the index has outperformed the S&P 500 annually by more than 5% annually.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Michael Holt, CFA  Michael Holt, CFA, is a senior stock analyst with Morningstar.

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