3. Santa Clara, Calif.-based Applied Materials (AMAT) sells manufacturing equipment to semiconductor, flat-panel display and solar companies. It has a dominant market share.
Morningstar says the company has a "wide economic moat", its perception of sustainable competitive advantages. According to Gartner, in 2009, Applied held 15% of a $17 billion market. It leverages existing relationships to build custom high-tech products, thus creating a durable revenue base.
Determined to maintain its position, it invests $1 billion a year into research and development. Its foray into the solar equipment business, though not currently a game-changer, will pay dividends in the long-run as alternative energy rises as a global priority.Morningstar is forecasting a fiscal 2011 slowdown for Applied, with 3% sales growth, which will likely create a buying opportunity for long-term investors. The semiconductor space is unusually cyclical. 12-Month Sales Growth: 90%
12-Month Net Income Growth: 407%
Operating Profit Margin: 24%
Debt-to-Equity Ratio: Minimal
5-Year Average P/E: 20
Current P/E: 19
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