#Morningstar #WideMoatStocks #StockInvesting
The stocks of these high-quality companies look fairly valued today but watch out for a chance to buy them on weakness.
00:00 Introduction
00:26 ServiceNow NOW
01:01 Charles Schwab SCHW
01:34 Applied Materials AMAT
Susan Dziubinski: I’m Susan Dziubinski with Morningstar. The US stock market is having a good year, with the Morningstar US Market index up more than 20% in 2024 at the time of this taping. But even bull markets have their pullbacks. So today, we’re talking about stocks of high quality, wide moat companies that look fairly valued today but that would be excellent stocks to buy on weakness. These are stocks we think investors should put on their watch lists.
The first stock to add to your wide moat watchlist is ServiceNow NOW. ServiceNow provides software solutions to businesses to manage various processes. Morningstar recently raised its fair value estimate on the stock by 7% to $900 after the company delivered outstanding results last quarter driven by many factors, including strong renewals, generative AI solutions, and customer workflow adoption. In fact, we think the company’s new AI solutions are widening its economic moat. We expect revenue to grow at an annual rate of 19% over the next five years.
The next wide-moat stock for your watchlist is Charles Schwab SCHW. Schwab operates brokerage, wealth management, banking and asset management businesses. Morningstar thinks Schwab has built a wide economic moat given its massive scale and industry-leading cost efficiency. Schwab’s revenue and earnings recovered in the latest quarter, thanks to a rebound in net interest income and healthy growth in its asset-management revenue. We ‘re forecasting multiple years of strong earnings growth ahead. We think Schwab’s stock is worth $76 per share.
And the final wide-moat stock to keep an eye on is Applied Materials AMAT. Applied Materials is the largest manufacturer of semiconductor wafer fabrication equipment in the world. Morningstar thinks Applied Materials holds the broadest portfolio among its competitors, so we expect it to maintain its leadership position, and we assign the company a wide economic moat rating. We forecast Applied Materials to grow at a mid-single digit rate over the course of market cycles as it benefits from trends toward more complex chips over time. We think Applied Materials stock is worth $193.
For more stock ideas be sure to subscribe to Morningstar’s channel and visit Morningstar.com.
Morningstar director Michael Wong, senior analyst Dan Romanoff, and analyst William Kerwin provided the research behind this segment.
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Read what our team is writing.
Susan Dziubinski https://www.morningstar.com/people/susan-dziubinski
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