5 Stocks with a Unique Competitive Advantage and Room to Climb

One of the most important investment themes of the past year has been the outperformance of profitable companies with a unique competitive advantage.

Obvious examples of stocks in that category include Nvidia Corp. NASDAQ:NVDAwhich dominates the AI ​​chip market, and Salesforce Inc. New York Stock Exchange: CRMwhose intuitive interface and ease of customization have made it a leader in corporate data management.

Even lesser-known titles are up to par.

For example, International Flavors and Fragrances NYSE: IFF is a key supplier to markets including food and beverage, personal care, health and wellness. The S&P 500 Index leads in terms of market share in its sector.

The VanEck Morningstar Wide Moat ETF BATS: MOAT track, the Morningstar Wide Moat Focus index of companies with attractive pricing and sustainable competitive advantages.

In other words, it’s made up of stocks “at the intersection of quality and value,” according to Ioannis Pontikis, senior equity analyst at Morningstar.

Here are a handful of stocks that meet those criteria:

Shares of the chipmaker jumped 6.35% on Feb. 16 after the company reported better-than-expected first-quarter earnings, boosted by rapidly growing demand for AI chips.

In a statement, Applied Materials CEO Gary Dickerson said: “Our leadership positions in key semiconductor sectors support continued outperformance as customers develop next-generation chip technologies critical to AI and IoT in next years”.

The company also targeted upside for the current quarter.

Applied Materials analyst forecasts show that nine analysts are increasing their price targets on the stock.

Analyst forecasts at Cheniere Energy show a price target of $198.70, an upside of 23.90% and a consensus view of “buy”.

The company is a leading producer and exporter of liquefied natural gas globally. It develops and operates a large network of LNG terminals and pipelines.

Despite forecasts of growing demand, Cheniere’s shares are down 5.80% this year, even as analysts see triple-digit earnings growth this year. Cheniere’s energy dividend yield is 1.08%, and the company has increased shareholder payouts over the past two years.

In its most recent quarter, the brokerage and wealth management giant reported a 36% decline in net income, to 68 cents per share, although as seen using MarketBeat’s Schwab earnings data, this is still higher than views.

Revenues fell by 29% due to higher interest expenses, but were offset by higher revenues from asset management and administrative fees. The market rally in the fourth quarter of 2023 was largely responsible for those revenue increases.

Schwab chart shows the stock forming a bullish consolidation below the Dec. 15 high of $71.50, Schwab analyst forecasts show a price target of $69.69, with an upside of 8, 22%.

With a quarterly return of 17.28% and a share price just below the all-time high, the cloud-based workflow specialist does not appear to be undervalued.

However, ServiceNow stock has more room to operate, based on its exceptional track record of earnings and revenue growth.

Wall Street expects ServiceNow earnings to decline in 2024 due to slowing subscription revenue.

However, the company has a partnership with Nvidia to develop artificial intelligence features to speed up workflow processes and also collaborates with Amazon Inc. NASDAQ:AMZN Web Services to deliver the ServiceNow platform to AWS customers.

Investors generally don’t think the highest-weight component in the S&P 500 is undervalued, but as with ServiceNow, analysts see more upside for Microsoft.

Like other tech stocks, Microsoft has rallied into a major artificial intelligence company, in part thanks to its initial investment in OpenAI. This gives Microsoft a unique competitive advantage over companies with a later start in the AI ​​sweepstakes.

Wall Street expects Microsoft’s earnings to grow 19% this year and another 15% in 2025, exceptionally strong for a mature, well-established company.

Before you consider Amazon.com, you’ll want to hear this.

MarketBeat tracks Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and Amazon.com wasn’t on the list.

While Amazon.com currently has a “buy” rating among analysts, top-rated analysts believe these five stocks are better buys.

View the five stocks here