According to Morningstar analyst Susan Dziubinski, strong companies share one trait: a lasting edge over their rivals. She refers to it as an economic moat, and when it widens, it signals a business built to compete for decades to come. Recently, three firms earned a wide-moat rating upgrade. Yet, despite stronger advantages, their stocks are trading above fair value according to Morningstar. Let’s briefly explore Dziubinski’s picks.
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Goldman Sachs
First, Goldman Sachs Group (GS) stands out as a global investment banking leader. It holds about 10% of the market for mergers and acquisitions. Better revenue mix and tighter rules have made its business less risky since the financial crisis. Still, shares trade at about $748, well above Morningstar’s $570 fair-value estimate.
Interactive Brokers Group
Next, Interactive Brokers Group (IBKR) gained a wide moat for a different reason. Its automated platform cuts costs far below what big rivals can match. This efficiency also supports strong trade execution. Morningstar values the stock at $46, but the current price is much higher at $63.
W.W. Grainger
Dziubinski’s final pick is W.W. Grainger (GWW), which is the largest industrial distributor in a fragmented market. Its size and reach give it an edge over smaller peers. Grainger has added millions of products to its catalog and plans to continue adding more, all while utilizing the same infrastructure. Morningstar sets a fair value at $960, yet the stock trades above that mark at roughly $1,000 per share.
In short, these companies have advantages that are likely to last for years. Still, Morningstar sees them as pricey today.