In this article, we will discuss the 10 Best Wide Moat Stocks to Invest In.
Russell Investments continues to monitor and analyze the potential for policy changes in President Trump’s second term in office. In December 2024, the North American Chief Investment Strategist noted 4 areas of focus- i.e., tariffs, immigration, fiscal policy, and deregulation. Let us see what impact tariffs can have on the broader US economy and what should investors do in these uncertain circumstances.
Impact of Tariffs on US
As per Russell Investments, the macroeconomic uncertainty is expected to continue to remain elevated in the near term, while the investors keenly wait to see whether the tariffs get scrapped after the 30-day period. To give a brief context, the US President announced that he and Mexican President Claudia Sheinbaum have decided to delay the imposition of these tariffs for 30 days. Notably, Trump also announced that he has delayed the imposition of tariffs on Canadian goods for 30 days.
If tariffs get implemented, there can be a modest one-time increase in price levels for US consumers, says the investment firm. This might push out marginally when inflation will return to the target range of 2%. However, in the base-case scenario, the firm expects that the US Fed will succeed in returning inflation to 2%. From a growth perspective, while the tariffs might create a modest drag on the US economic activity, the broader economy is expected to avoid a recession.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
What Should Be the Strategy for Investors?
Saxo Bank A/S believes that investors are required to ignore the noise and remain focused on fundamentals. While short-term volatility remains inevitable, investors need to prioritize long-term growth trends over reactionary trades. Therefore, investing in quality companies having strong domestic revenue, pricing power, and resilient business models is expected to withstand such headwinds. The bank believes that investing in high dividend-paying stocks in defensive sectors such as consumer staples might help mitigate the short-term negative impacts. Furthermore, the focus can be on secular growth themes that have the potential to transcend political cycles.
Elsewhere, Russell Investments opines that investors can benefit from staying disciplined during uncertain times. While the tariffs can adversely impact the broader economic growth, mainly in Mexico and Canada, there is a possibility of central banks and governments stepping in with support to mitigate the impacts of tariffs.
With this in mind, we will now have a look at the 10 Best Wide Moat Stocks to Invest In.
A financial analyst at his computer monitor, tracking the public company’s investments.
Our Methodology
To list the 10 Best Wide Moat Stocks to Invest In, we scanned through VanEck Morningstar Wide Moat ETF and some online rankings. Next, we chose the stocks that were popular among hedge funds. Finally, the stocks are arranged in the ascending order of their hedge fund sentiments, as of Q3 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Wide Moat Stocks to Invest In
10) Corteva, Inc. (NYSE:CTVA)
Number of Hedge Fund Holders: 33
Corteva, Inc. (NYSE:CTVA) operates in the agriculture business. The company has a wide economic moat rating, owing to its portfolio of patented biotech seeds and crop chemicals. Such patented products are well-placed to command pricing power as they shield farmer yields and reduce other expenses like insecticides, says Morningstar. Corteva, Inc. (NYSE:CTVA)’s intangible assets stem from the R&D needed for the continual development of proprietary seed and crop chemical formulations. As and when patents expire and crop pests build some resistance to current products, the seeds possessing new traits and chemical formulations are required to be developed.
Therefore, well-established companies are required to invest in R&D. Morningstar reported that Corteva, Inc. (NYSE:CTVA) invests ~8% of sales in new product development each year, in line with its competitors. Morningstar added that seeds generate the majority of profits, and it remains confident that this business will continue to garner excess returns on invested capital for a minimum of 20 years.
Barclays analyst Benjamin Theurer upped the company’s price objective to $64 from $62, keeping an “Equal Weight.” The firm continues to have an optimistic outlook on crop protection and is confident in diversified international protein names and ingredients. RBC Capital raised the target to $73 from $68, keeping an “Outperform” rating. RBC highlighted that Corteva, Inc. (NYSE:CTVA)’s strong product offerings and technology can help fuel pricing power to partially offset FX headwind impact.
9) U.S. Bancorp (NYSE:USB)
Number of Hedge Fund Holders: 46
U.S. Bancorp (NYSE:USB) is a financial services holding company, offering various financial services to individuals, businesses, institutional organizations, governmental entities, and other financial institutions. The company’s wide economic moat revolves around cost advantages and switching costs. Citi reiterated its “Buy” rating on the company’s shares, offering a price target of $65. The firm believes that U.S. Bancorp (NYSE:USB) is one of the biggest beneficiaries of fixed-rate asset repricing. This is because of the company’s large underwater securities and mortgage books.
Elsewhere, DA Davidson analysts upped the company’s stock from “Neutral” to “Buy,” adjusting the price objective from $58.00 to $60.00. This upgrade is backed by the anticipations of revenue growth rebound and controlled expense management. As per the firm, U.S. Bancorp (NYSE:USB) has pivoted its capital expenditures from defensive to more offensive strategies. This is expected to lead to moderating expense growth in comparison to previous years.
The acquisition of Union Bank continues to provide numerous opportunities for U.S. Bancorp (NYSE:USB), enhancing its market position and fueling growth. One of the leading benefits revolves around the addition of high-quality, low-cost deposits to the U.S. Bancorp (NYSE:USB)’s balance sheet.
8) Gilead Sciences, Inc. (NASDAQ:GILD)
Number of Hedge Fund Holders: 59
Gilead Sciences, Inc. (NASDAQ:GILD) is a biopharmaceutical company, which is engaged in discovering, developing, and commercializing medicines in the areas of unmet medical need. The company’s wide economic moat stems from its leadership position in the treatment of HIV, with products that are patented and form the basis of today’s treatment regimens. Morgan Stanley upped Gilead Sciences, Inc. (NASDAQ:GILD)’s stock to “Overweight” from “Equal Weight,” providing a price target of $113, up from $87.
The firm anticipates the potential for upward estimate revisions on lenacapavir for pre-exposure prophylaxis (PrEP) and further multiple expansion as Gilead Sciences, Inc. (NASDAQ:GILD) continues to make progress with its next-gen HIV treatment strategy. The company has been facing a competitive landscape, mainly in the HIV and oncology markets. While Gilead Sciences, Inc. (NASDAQ:GILD) possesses a strong position in HIV treatments, it remains focused on maintaining its market share via innovative products.
Gilead Sciences, Inc. (NASDAQ:GILD)’s exploration of treatments for inflammatory and fibrotic diseases can expand its potential revenue streams. Therefore, its track record of successful drug development and commercialization offers a robust foundation for translating pipeline assets into marketable products. Lenacapavir’s market dominance is backed by the absence of competitors with comparable efficacy, placing it in a strong position for HIV prevention.
7) Bristol-Myers Squibb Company (NYSE:BMY)
Number of Hedge Fund Holders: 70
Bristol-Myers Squibb Company (NYSE:BMY) discovers, develops, licenses, manufactures, markets, distributes, and sells biopharmaceutical products. As a result of partnerships and acquisitions, the company has built a strong portfolio of drugs and a robust pipeline, forming a base of the wide economic moat. For example, its large acquisition of Celgene provided it with an excellent pipeline and a strong entrenchment in blood cancer. As per Morningstar, Bristol-Myers Squibb Company (NYSE:BMY)’s recent acquisitions i.e., oncology firms Mirati and RayzeBio and neurology firm Karuna, continue to strengthen the company’s strong overall pipeline.
Leerink Partners analyst David Risinger reiterated the bullish stance on the company’s stock, providing a “Buy” rating on January 12. The analyst’s rating is backed by a strong launch performance of Bristol-Myers Squibb Company (NYSE:BMY)’s COBENFY, which continues to demonstrate strong sales momentum since its introduction to schizophrenia treatment. The analyst noted potential long-term benefits of COBENFY as it studies for additional indications like Alzheimer’s disease-related psychosis and several other disorders. Such factors, together with the higher pricing strategy in comparison to competitors, are expected to help Bristol-Myers Squibb Company (NYSE:BMY).
Citigroup increased the price target on shares of Bristol-Myers Squibb Company (NYSE:BMY) from $60.00 to $65.00, giving a “Neutral” rating on 28th January.
6) The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 76
The Walt Disney Company (NYSE:DIS) operates as an entertainment company. The intangible assets aiding the company’s wide moat consist of the intellectual property behind franchises and characters. Since it has numerous touchpoints, The Walt Disney Company (NYSE:DIS) is well-placed to monetize this IP in numerous ways i.e., at the box office, at a theme park, cruise, or home TV. The company’s franchises continue to endure and entertain generations, providing stable revenue opportunities. Next, its streaming services, parks, and gaming tend to offer diversification.
Analyst David Karnovsky from JP Morgan maintained a “Buy” rating on the company’s stock, providing a price target of $128.00. The analyst’s rating stems from a variety of factors such as The Walt Disney Company (NYSE:DIS)’s unique content and improving streaming financials. Furthermore, the integration of Hulu and ESPN on Disney+ continues to be recognized by marketers, consumers, and investors. As per the analyst, ESPN Flagship offers an under-appreciated opportunity for revenue growth.
The Walt Disney Company (NYSE:DIS)’s parks and experiences segment can see sustained operating income growth, courtesy of committed capex on new attractions and cruises, says Karnovsky. Meridian Funds, managed by ArrowMark Partners, released its Q2 2024 investor letter. Here is what the fund said:
“The Walt Disney Company (NYSE:DIS) operates a diversified entertainment business with theme parks, media networks, and streaming services. We own Disney because we believe its strong brand, valuable IP, and expanding streaming offerings will drive sustainable long-term growth. The company’s stock, however, underperformed in the quarter due to concerns about a slowdown in growth at its theme park division. While park revenue still grew by 10% year-over-year, management’s commentary suggested a moderation in post-pandemic demand and rising costs, leading to a disappointing outlook for park operating income in the second half of the year. This overshadowed the positive news that the company’s streaming segment, driven by strong subscriber growth at Disney+, reached profitability ahead of schedule. We held our position and will continue to monitor the performance of the theme park division.”
5) Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 123
Adobe Inc. (NASDAQ:ADBE) has a wide economic moat, owing to the switching costs, a strong brand reputation, and a diversified product line. As per Morningstar, the company has been dominating content creation software with its Photoshop and Illustrator solutions. It added new products and features to the suite with the help of organic development and bolt-on acquisitions, enabling it to drive a comprehensive portfolio of tools utilized in print, digital, and video content creation. Furthermore, the launch of Firefly demonstrates a critical AI solution, further bolstering its economic moat.
Adobe Inc. (NASDAQ:ADBE)’s commitment to innovation is a key focus, mainly in the realm of AI. The company continues to integrate AI capabilities throughout its Creative, Document, and Experience Clouds. Additionally, it aims to enhance user productivity and expand the product offerings. Adobe Inc. (NASDAQ:ADBE) delivered a record FY 2024 revenue of $21.51 billion, highlighting robust demand and the critical role Creative Cloud, Document Cloud, and Experience Cloud play in fueling the broader AI economy.
The company’s strategy, AI innovation, and robust cross-cloud opportunity place it well for 2025 and beyond. Polen Capital, an investment management company, released its Q3 2024 investor letter. Here is what the fund said:
“We added to several existing positions in the quarter including Adobe Inc. (NASDAQ:ADBE), Workday, Shopify, MSCI, and Paycom Software. We feel Adobe is poised for re-accelerating revenue and earnings growth partially due to the monetization of its Firefly GenAI product embedded in its creative software.”
4) Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 165
Visa Inc. (NYSE:V) operates as a payment technology company in the US and internationally. The company has been enjoying a wide economic moat as a result of its scale, brand recognition, technology, and network effects. Collectively, these factors allow the company to process transactions securely and efficiently globally. The rise in consumers using a payment network will make that network attractive to merchants. In turn, this will make the payment network more convenient for consumers, and the cycle continues. Therefore, Visa Inc. (NYSE:V) is well-placed to benefit from its large scale.
TD Cowen analyst Bryan Bergin maintained the bullish stance on the company’s stock, offering a “Buy” rating on 28th January. The analyst noted the stability of Visa Inc. (NYSE:V)’s core consumer payments business, with strength in holiday spending throughout travel, retail, and entertainment sectors. Furthermore, the analyst highlighted the company’s robust performance in Q1 2025, aided by a 16% increase in cross-border volume and higher-than-anticipated international transaction revenue and value-added services.
This growth stemmed from healthy consumer spending and positive macroeconomic conditions, resulting in an optimistic outlook for Visa Inc. (NYSE:V)’s net revenue and EPS growth. Montaka Global Investments, an investment management company, released its Q3 2024 investor letter. Here is what the fund said:
“Montaka owns several duopolists in the financial services industry, including Visa Inc. (NYSE:V) and Mastercard in payments; and S&P Global in credit ratings and financial data services. These businesses have competitively protected and reliably growing core businesses. But they also have newer, high-probability adjacent opportunities. The market, however, is underappreciating this powerful combination, in our view.
For Visa and Mastercard, their core businesses in global payment processing are being complemented by significant growth in two areas:
- New processing opportunities in peer-to-peer, business-to-business, business-to-consumer, and government-to-consumer payments; and
- Value-added services, including risk, fraud-detection, issuance, acceptance, and open banking.”
3) Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 202
Morningstar gave a wide moat rating on Alphabet Inc. (NASDAQ:GOOGL) as a result of the company’s intangible assets, network effect, cost advantage, and customer switching costs. The company’s long-term growth is expected to be aided by its brand equity, AI expertise, and proprietary algorithms. Its network effects, fueled by its significant user base throughout multiple platforms, will also lend some support. Alphabet Inc. (NASDAQ:GOOGL) made significant strides in integrating AI throughout its product portfolio, with positive user satisfaction and monetization rates in comparison to traditional search.
Goldman Sachs maintained a “Buy” rating on Alphabet Inc. (NASDAQ:GOOGL)’s stock, providing a steady price target of $210.00. Goldman Sachs remains optimistic about the company’s positioning for the future of AI in enterprise and consumer computing. The firm lauded Alphabet Inc. (NASDAQ:GOOGL)’s leadership in large-scale LLMs with advanced multimodal capabilities. Amidst potential commoditization in the AI model layer, the investment banking company expects that the tech giant’s integration of AI into consumer and enterprise applications remains critical for widespread adoption and ROI.
Oakmark Funds, advised by Harris Associates, released its Q4 2024 investor letter. Here is what the fund said:
“Alphabet Inc. (NASDAQ:GOOGL) was the top contributor during the quarter. Despite ongoing litigation with the Department of Justice in its antitrust case, the U.S.-headquartered interactive media and services company’s stock price rose after posting solid third-quarter earnings. In the Search division, the company generated low-teens year-over-year revenue growth and management highlighted that they’re seeing strong user engagement with their new AI Overviews feature. The biggest upside surprise came from the Cloud division, where revenue growth accelerated to 35% and margins reached a record of 17%. This performance was driven by client demand for AI Infrastructure and Generative AI Solutions as well as core Google Cloud Platform (GCP) products. We continue to believe Alphabet is a collection of great businesses that can unlock further value over the long term through its world-class AI capabilities.”
2) Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) continues to enjoy a wide economic moat, courtesy of 2 segments, i.e., productivity and business processes and intelligent cloud. The company’s customers tend to favour its products as stand-alone solutions and appreciate its immense product breadth. Furthermore, Microsoft Corporation (NASDAQ:MSFT)’s applications remain tightly integrated, making the products more appealing. Now, given the inclusion of OpenAI’s machine learning technology, the company has further strengthened its economic moat.
Morningstar opines that Microsoft Corporation (NASDAQ:MSFT) continues to maintain healthy AI demand and monetization. Overall, the expansion of hybrid cloud environments, proliferation of AI, and Azure are expected to fuel growth in 2025. Microsoft Corporation (NASDAQ:MSFT) has been using its on-premises dominance to enable clients to move to the cloud. Anyone using the company’s wildly popular suite of apps – including Word, PowerPoint, and Excel – will stick to its ecosystem, aiding long-term revenue visibility.
Therefore, increased customer engagement supports it in generating revenue from the initial sale of services, enabling the company to upsell and cross-sell other ones too. RiverPark Advisors, an investment advisory firm and sponsor of the RiverPark family of mutual funds, released its Q3 2024 investor letter. Here is what the fund said:
“Microsoft Corporation (NASDAQ:MSFT): MSFT was a top detractor in the third quarter following a fiscal fourth quarter earnings report that featured inline operating metrics but mixed guidance. Positively, the company reported strong revenue (+15%) and earnings growth (+10%), powered by Azure (+30%), and operating margins of 43%. Guidance however calls for lower than expected fiscal first quarter Azure revenue as infrastructure constraints limit growth, and higher capital expenditures throughout the company’s fiscal 2025 to alleviate these constraints. The company expects growth to reaccelerate in the back half of fiscal 2025 as more AI capacity comes online.
Cloud-based services have become the company’s largest revenue and earnings producer. The company’s Azure platform alone has the potential to grow to more than $200 billion in annual revenue over the next decade. Overall, we believe that the company will continue to deliver double-digit revenue and EPS growth and generate an enormous amount of free cash flow to return to shareholders and use for acquisitions.”
1) Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 286
Amazon.com, Inc. (NASDAQ:AMZN) possesses a wide economic moat, courtesy of its network effects, cost advantages, intangible assets, and switching costs, says Morningstar. The company continues to disrupt the traditional retail industry, while, at the same time, emerging as the leading infrastructure-as-a-service provider through Amazon Web Services (AWS). The firm also added that Amazon.com, Inc. (NASDAQ:AMZN) has been widening its lead, which is expected to result in economic returns well above the cost of capital. The secular pivot towards e-commerce remains unabated, with the company increasing its market share.
Amazon Prime binds Amazon.com, Inc. (NASDAQ:AMZN)’s e-commerce efforts together, resulting in providing a steady stream of high-margin recurring revenue. In return, consumers enjoy one-day shipping, exclusive video content, and other services, says Morningstar. Therefore, the company builds a healthy circle in which customers and sellers tend to attract each other. Notably, high-margin advertising and AWS continue to grow faster than the corporate average, which is expected to fuel profitability over the years. Through AWS, Amazon.com, Inc. (NASDAQ:AMZN) is one of the leading companies in public cloud services.
The full-stack AI/Cloud offering is well-placed to benefit from a multi-year shift in AI and IT workloads. Tsai Capital, an investment management company, released a Q4 investor letter. Here is what the fund said:
“Amazon.com, Inc. (NASDAQ:AMZN) (AMZN—Year of First Purchase: 2017) Amazon was founded by Jeff Bezos in his garage in 1994 and today dominates the markets it serves. The company’s e-commerce business is gaining market share, despite its immense size, while its cloud services division, Amazon Web Services (AWS), is by far the leading cloud provider. We estimate that AWS now generates 60-65% of the company’s total operating profits.
Both Amazon retail and AWS benefit from numerous competitive advantages and deliver a high customer value proposition. Rather than leveraging its size to maximize short-term profits, the company follows a scale-economies-shared business model, sharing a generous portion of its margin with the consumer. This creates a flywheel effect that reinforces the company’s ecosystem.
Amazon’s approach of investing heavily in the business today to create shareholder value later masks the company’s underlying earnings power. As consumers continue to shift their spending from in-store purchases to online shopping, and as data continues to migrate from on-premise servers to the cloud, we expect Amazon to grow revenues at a low double-digit rate for at least the next five years and to significantly increase its operating margins.”
While we acknowledge the potential of AMZN as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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