Five Value Stocks for the Patient Investor: Assessing Moats, Margin of Safety, and Long-Term Compounding

The starting point for any disciplined investor is a clear view of the market's current price tag. As of year-end, the broad US equity market trades at a 4% discount to a composite of Morningstar's fair value estimates. On the surface, that suggests a modest margin of safety. But averages can be misleading. This discount is heavily skewed by the soaring valuations of mega-cap tech giants, whose market weight distorts the overall picture. In reality, the market's valuation is a tale of two extremes: a handful of behemoths command premium prices, while a broader swath of companies, particularly in the small-cap segment, offer a more compelling entry point.

For the patient investor, the most attractive opportunities typically lie in the overlooked. Small-cap stocks, in particular, remain especially attractive, trading at a deeper discount that reflects their lower profile and less analyst coverage. This creates a fertile ground for discovery. The thesis is straightforward: durable competitive advantages-what we call a wide economic moat-are the bedrock of long-term compounding. When such a company is temporarily out of favor, its stock can offer a margin of safety that larger, more celebrated firms do not.

This framework points toward a few key areas. First, it validates a focus on companies with predictable cash flows and competent management, as highlighted in our selection of value stocks. Second, it suggests looking beyond the familiar US market. International equities, especially in emerging markets, often present a different growth story and can serve as a currency hedge. As one strategist noted, the rest of the world is cheap compared with the US, and global diversification has historically smoothed returns through cycles of US underperformance.

The bottom line is that volatility is the market's constant companion, and 2026 promises more. But for the value investor, volatility is not a reason to flee-it's often the source of opportunity. The widest moats and the most compelling margins of safety are not found in the crowded, high-conviction trades. They are found in the overlooked, the misunderstood, and the temporarily undervalued. The task is to identify those durable businesses, assess their true intrinsic value, and then have the patience to wait for the market to catch up.

Stock Pick 1: The Trade Desk (TTD)

The Trade Desk presents a classic value setup: a durable business facing temporary turbulence. The company's core moat is its dominant position in programmatic advertising, a platform that connects buyers and sellers of digital ad space. This isn't a fleeting advantage; it's a wide economic moat built on scale, data, and network effects. The evidence shows the business is still growing at a market-beating pace, with revenue rising 18% year over year last quarter and Wall Street expecting 16% growth for 2026. That underlying strength is the foundation for long-term compounding.

The disruption, however, is real and self-inflicted. Last year, the company rolled out its AI-powered ad-buying platform, Kokai, to mixed reviews. This caused some customers to leave and others to scale back usage, directly contributing to the stock's sharp decline. The result is a significant margin of safety. The stock is down more than 70% from its all-time high, and it now trades at a forward P/E of 18.5 times, a discount to the broader market's 22.1 times. This valuation gap is the opportunity.

The company's capital allocation is a positive sign. Management is using this period of underperformance to aggressively buy back shares, a move that boosts earnings per share and rewards patient owners. This disciplined approach to capital, combined with the company's focus on fixing the Kokai rollout, suggests management is prioritizing long-term value over short-term optics.

The bottom line is that The Trade Desk's current price reflects a crisis of confidence, not a crisis of business fundamentals. Its wide moat and strong growth trajectory remain intact. For the patient investor, the stock's deep discount offers a margin of safety that could be rewarded as the company navigates this temporary headwind and the market re-evaluates its intrinsic value.

Stock Pick 2: Novo Nordisk (NVO)

Novo Nordisk's story is one of a powerful moat under siege. The company's wide economic advantage is built on its GLP-1 obesity drug franchise, a market-leading platform that generated a gross margin of 81.93% last quarter. That level of profitability is the hallmark of a durable business, one capable of generating immense cash flow for decades. Yet, in 2025, the stock plunged 41% as the company navigated a CEO transition and issued guidance cuts. This severe price decline is the margin of safety the value investor seeks-a discount that reflects a crisis of confidence, not a crisis of the business model.

The strategic pivot is now underway. Management's recent launch of an oral GLP-1 pill is a direct move to defend its market position. This new formulation is easier to take, cheaper to produce, and could significantly expand the patient base. It's a classic defensive play by a company that understands its competitive landscape. The long-term compounding story remains intact: the underlying demand for weight-loss treatments is structural, and Novo Nordisk's brand and manufacturing scale are formidable barriers to entry.

The valuation now supports a patient thesis. With the stock trading at a forward P/E of just 14, it offers a significant discount to the broader market. Combined with a dividend yield of 3.3%, it provides a tangible return while investors wait for the strategic reset to bear fruit. The guidance cuts were partly due to counterfeit drugs, a challenge that regulators may soon address. If that pressure eases and the oral pill gains traction, the path to re-rating is clear.

The bottom line is that Novo Nordisk's current price is a stark contrast to its underlying strength. The company's wide moat is being tested, but its strategic response is measured and capital-efficient. For the long-term investor, the deep discount offers a compelling entry point to own a cash-generating machine at a fraction of its recent peak.

Stock Pick 3: AT&T (T)

AT&T is the definition of a blue-chip value play. Its wide economic moat is built on an entrenched network and a massive, loyal customer base-a foundation of predictable cash flows that has powered the company for decades. In 2026, that moat is being leveraged for a new growth phase, but the stock's current price reflects a market focused on the past. The company trades at a forward P/E of just 11, a significant discount to the broader market, while offering a dividend yield of 4.63%. This combination provides a tangible margin of safety for a patient investor, offering income while waiting for the business to re-rate.

The potential for asymmetric upside is tied directly to two strategic initiatives. First, there is the ongoing consolidation in the telecom industry. AT&T's recent move to acquire substantially all of Lumen's Mass Markets fiber business is a clear bet on this trend. This deal is designed to accelerate the company's fiber build-out, aiming for 60 million fiber locations by the end of 2030. A wider, faster fiber network is the key to competing in the broadband and business services markets, and it represents a tangible asset that could be monetized more effectively in a less fragmented landscape.

Second, the monetization of this fiber network itself is a long-term compounding story. Fiber is the future of connectivity, and AT&T's investment is aimed at capturing that value. The company's core operations continue to generate strong earnings, providing the capital to fund this strategic pivot. The low valuation suggests the market is not yet pricing in the full potential of this asset or the benefits of industry consolidation.

The bottom line is that AT&T offers a classic value setup. It is a wide-moat business trading at a discount, supported by a high-yielding dividend. The path to re-rating is clear: successful integration of the fiber acquisition and execution on its build-out could unlock significant value. For the patient investor, the stock provides a margin of safety today while positioning for a re-rating tomorrow.

Stock Pick 4: Campbell's (CPB)

Campbell's is a company in the midst of a deliberate transformation, a classic case of a wide-moat business adapting to a changing market. Its economic moat, as rated by Morningstar, is built on a portfolio of strong brands and entrenched relationships with retailers-a foundation of predictable cash flows that has served it for generations. Yet, the core soup business faces persistent headwinds. The company's strategic pivot is a disciplined capital allocation move: shifting its portfolio mix toward snacks and driving efficiencies across its supply chain and manufacturing network. This allows it to boost spending behind its brands, a necessary reinvestment to defend its moat in a competitive landscape.

The evidence points to a company that has successfully navigated a difficult period. Over the past several years, Campbell's has executed on this plan, moving away from its traditional core. The result is a business that is now positioned for a more stable, if modest, growth trajectory. Morningstar's long-term forecast calls for low single-digit annual sales growth, a realistic path for a mature consumer staples company. The focus on supply chain efficiencies also directly supports profitability, a key input for intrinsic value.

This strategic shift has created a clear margin of safety. Campbell's stock lands on the value side of the Morningstar Style Box, a key signal for the patient investor. It is a wide-moat company with a predictable cash flow profile, but its current price does not reflect the full potential of its transformed business. The market's skepticism, perhaps focused on the legacy soup business or the execution of the snack transition, has left the stock significantly undervalued. For an investor, this is the setup: a durable business, managed by a team making smart capital allocation decisions, trading at a discount to its long-term earnings power. The margin of safety is the gap between today's price and the value of that predictable cash flow stream.

Stock Pick 5: Bristol-Myers Squibb (BMY)

Bristol-Myers Squibb presents a classic value opportunity in a stable industry. The company's wide economic moat is built on a portfolio of blockbuster drugs and a robust pipeline, particularly in oncology and immunology. This foundation of predictable cash flows is the hallmark of a durable business. Yet, the stock trades on the value side of the Morningstar Style Box, a clear signal that the market is not fully pricing in this strength. The setup is one of a wide moat trading at a discount, offering a margin of safety for a patient investor.

The primary overhang is the looming patent cliff. A significant portion of the mature portfolio faces patent expirations, with 47% of total revenue exposed to patent threats through 2028. This creates near-term pressure and has contributed to the stock's undervaluation. However, management's strategy is focused on extending the product lifecycle and supporting long-term growth. This is achieved through disciplined capital allocation, with a clear emphasis on R&D and strategic acquisitions to bolster the pipeline. The goal is to have newer therapies soften the impact of lost patent exclusivities.

The bottom line is that Bristol-Myers Squibb is a company in transition, but its core business remains intact. The wide moat provides a stable cash flow base, while the capital allocation focus on R&D aims to compound that value over the long term. For the value investor, the current price reflects a crisis of confidence around the patent cliff, not a crisis of the business model. If management successfully navigates this period and the pipeline delivers, the path to re-rating is clear. The stock's placement on the value side of the Morningstar Style Box underscores that the market is underestimating the company's ability to weather this challenge and continue compounding.

Risks, Catalysts, and What to Watch

The value investor's edge is not in avoiding risk, but in understanding it. For the stocks discussed, the primary danger is mistaking a temporary setback for a permanent decline. Each company has a wide economic moat-a durable competitive advantage-that remains intact. The opportunity lies in the market's myopia, which discounts the stock based on near-term noise. The key is to separate the business's reason for growth from the current price action.

For instance, Novo Nordisk's 41% plunge in 2025 was driven by a CEO transition and guidance cuts due to counterfeit drugs, not a loss of its GLP-1 franchise. The company's moat is its market-leading drug platform and now its new oral pill, which is a direct strategic response to defend that position. The risk is that the market continues to focus on the past headwinds, ignoring the path to resolution. Similarly, The Trade Desk's AI rollout issues are a tactical misstep, not a fundamental erosion of its dominant platform. The patient investor must have the discipline to look through these crises of confidence.

Catalysts for re-rating are emerging, and they often come from outside the company's control. Policy shifts can create asymmetric opportunities, especially for companies with strong balance sheets. As one investor noted, the western govs want chip sovereignty, which could provide massive government support for a company like Intel. This is a classic catalyst: a structural tailwind that could accelerate a turnaround. For AT&T, the catalyst is industry consolidation and the successful integration of its fiber acquisition, which could unlock the value of a critical new asset.

More broadly, watch for a return to growth in the overlooked sectors. Healthcare stocks like Novo Nordisk could re-rate if regulatory pressure on counterfeit drugs eases and the oral pill gains traction. Communications and media stocks like AT&T and Comcast could benefit from a broader sector recovery, driven by capital expenditure cycles or improved consumer spending. The metrics to monitor are clear: for Novo Nordisk, watch for the oral pill's market penetration and guidance stability; for AT&T, track fiber build-out progress and integration milestones; for The Trade Desk, monitor customer retention and platform adoption post-Kokai fixes.

The bottom line is that these opportunities are not for the impatient. They require a long-term view and the fortitude to hold through volatility. The catalysts are often macro or strategic, not quarterly earnings beats. By focusing on the width of the moat and the durability of the cash flows, the investor can identify which temporary setbacks are worth weathering and which are signs of a deeper problem.