10 Cheap US Wide-Moat Stocks for 2025

The constituents of the Morningstar Wide Moat Focus Index are a fertile hunting ground for long-term investors looking for high-quality stocks to buy that are trading at cheap prices.

10 Cheap Wide-Moat Stocks for 2025

These were 10 of the most undervalued wide-moat stocks in the Morningstar Wide Moat Focus Index as of Dec. 27, 2024.

1. Estee Lauder EL
2. Huntington Ingalls Industries HII
3. Pfizer PFE
4. International Flavors & Fragrances IFF
5. Nike NKE
6. Campbell Company CPB
7. Brown-Forman BF.B
8. Zimmer Biomet ZBH
9. NXP Semiconductors NXPI
10. MarketAxess Holdings MKTX

The most undervalued wide-moat stock on the list, Estee Lauder, was trading 54% below our fair value estimate as of Dec. 27, while the last company on the list, MarketAxess Holdings, was trading 25% below our fair estimate. We think all 10 of these names are high-quality stock ideas for long-term investors to consider.

To keep the index focused on the least-expensive high-quality stocks, Morningstar reconstitutes the index regularly. The index consists of two subportfolios containing 40 stocks each, many of which are overlapping positions. The subportfolios are reconstituted semiannually in alternating quarters on a “staggered” schedule.

Morningstar reevaluates the index’s holdings and adds and removes stocks based on a preset methodology. Because stocks are equally weighted within each subportfolio, the reconstitution process also involves rightsizing positions.

After the most recent reconstitution, half the portfolio added 13 stocks and eliminated 13 stocks.

13 Undervalued Stocks Added to the Morningstar Wide Moat Focus Index

These cheap stocks were added to the reconstituted subportfolio of the Morningstar Wide Moat Focus Index on Dec. 20.

Five of the cheap wide-moat stocks added to the index hail from the healthcare sector, which is undervalued overall. A bit of a surprise is that four of the undervalued wide-moat stocks added are from the technology sector, which looks overvalued right now.

13 Stocks Removed From the Morningstar Wide Moat Focus Index

These stocks were removed from the reconstituted subportfolio of the Morningstar Wide Moat Focus Index on Dec. 20.

Stocks can be removed from the index for a few different reasons: if we downgrade their economic moat ratings, if their market capitalizations fall beneath a certain level, or if their price/fair value ratios rise significantly. Most of the stocks removed from the subportfolio during the latest reconstitution were pushed out by stocks that were trading at more attractive price/fair value ratios at the time of reconstitution.

However, Comcast CMCSA was booted from the reconstituted portfolio after Morningstar downgraded its economic moat rating, and Etsy ETSY was removed from the subportfolio as its market cap fell beneath our hurdle for inclusion.

That being said, the stocks that were removed shouldn’t always be considered stocks to sell, especially when the removed stocks are still trading in what we’d consider a buying range. They’re just not as undervalued as the stocks added to the index at the time of the reconstitution.

What Are Wide-Moat Stocks?

Morningstar thinks that companies with wide economic moats have significant advantages that allow them to successfully fend off competitors for decades. Companies can carve out their economic moats in a variety of different ways: by having high switching costs, through strong brand identities, or by possessing economies of scale, to name just a few.

Over time, we’ve found that the strategy of investing in wide-moat stocks trading at a discount to their fair values has been an effective approach to stock investing.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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