This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

7 Stocks With Big Gains, Downside Protection (Update1)

Stocks in this article: STJ ADSK FII CPLA CAT AB WTW

(Story updated to note that S&P recently lowered its rating on Weight Watchers to "sell" from "buy" on valuation concerns.)

BOSTON ( TheStreet) -- If you're still in a defensive investing posture after last year's stomach-churning market, it's time to consider buying the stocks of companies with impregnable market-leading positions.

Ratings firm Morningstar refers to them as "wide moat" companies.

A "wide moat," essentially, means a company has a distinct and sustainable competitive advantage over its peers that could protect its business in the event of a recession or a even a shift in the direction of its industry.

The width of a company's moat is a result of a number of variables, including its size, brand-name strength, unique technologies, and the difficulty its customers may have in switching to a competitor's products.

Those types of characteristics help keep a company and its cash flow stable in a difficult economy.

And Morningstar says that "companies that have generated returns on capital higher than their cost of capital for many years running usually have a moat, especially if their returns on capital have been rising or are fairly stable."

Morningstar found seven wide-moat companies with share-price returns ranging from 10% to 36% this year, a period in which the S&P 500 Index jumped 7%.

But indicative of how quickly things can change and the moat can start to evaporate, two big money managers that are on the list below, which was issued Feb. 6 by Morningstar, have seen their shares tumble within the last week on poor results from late 2011 because of investor withdrawals due to the markets' volatility as well as proposed regulatory changes.

Those firms, AllianceBernstein (AB) and Federated Investors (FII), face a new threat to their money market fund businesses, in the form of new regulations now being discussed by the Securities and Exchange Commission.

If enacted, they could result in the fund firms having to raise capital to provide greater support to their funds in the event of a panic, or another that would allow the net asset value of money market fund shares to float, a decided departure from their now-fixed $1 a share benchmark, a change that would be sure to chase off investors seeking a safe, predictable return that these types of funds offer.

Here are Morningstar's selection of seven stocks that have "wide moat" properties in inverse order of their share-price appreciation this year:

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs