Susan Dziubinski: I’m Susan Dziubinski with Morningstar. This week, we’re taking a look at two attractive wide-moat stocks. What are wide-moat stocks? Wide-moat stocks are the stocks of companies that have built out competitive advantages that Morningstar expects to endure for 20 years or longer. Companies can carve out economic moats by having size and scale that provide cost advantages. Or they can have intangible assets like patents or proprietary technologies that give them an edge. Or they can possess high switching costs that keep their customers sticking around.
Despite their competitive advantages, the stocks of these two companies look very undervalued today. We think the market’s underestimating these companies. As a result, these cheap wide-moat stocks are promising investment opportunities for patient investors.
2 Cheap Wide-Moat Stocks for Patient Investors to Consider
Huntington Ingalls Industries HIIConstellation Brands STZ
Our first cheap wide-moat stock to buy is Huntington Ingalls Industries HII. Huntington is the largest independent military shipbuilder in the United States. As a manufacturer of difficult-to-replicate products with long production and upgrade cycles, we think Huntington has carved out a wide economic moat. In late April, the US Navy awarded Huntington a contract for two Virginia-class submarines. And we expect to see more awards for Huntington as the US government implements overdue investments in shipyard productivity and personnel. We think Huntington’s stock is worth $316, and shares trade well below that.
Read Morningstar’s full report on Huntington Ingalls Industries.
Our second cheap wide-moat stock to buy is Constellation Brands STZ. While the company maintains wine and spirits businesses, the bulk of the company’s revenue comes from Mexican beer imports Modelo and Corona. And Morningstar thinks it’s the Mexican beer portfolio that’s given the company a wide economic moat. Though the company has struggled due to softening demand, we expect beer innovation and distribution gains to return sales growth to a mid-single-digit trajectory longer term. And also notably, Warren Buffett’s Berkshire Hathaway BRK.A BRK.B doubled down on its position in Constellation Brands during the first quarter, too. We think this undervalued stock is worth $274.
Read Morningstar’s full report on Constellation Brands.
Morningstar analysts Nicolas Owens and Dan Su provided the research behind this segment.
Watch The 3 Most Overvalued Stocks Top Managers Are Selling in 2025 for more from Susan Dziubinski.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
