3 Little-Known Mid-Cap Stocks with Wide Moats

Many investors who seek out moat stocks are likely acquainted with well-known companies like Coca-Cola and Visa. However, these industry behemoths may face limited growth prospects as they have already established a strong presence in nearly all global markets.

As a result, I embarked on a quest to discover mid-cap stocks, which are comparatively smaller enterprises with more room for market expansion.

My exploration led me to examine the holdings within iShares Core S&P Mid-Cap ETF (IJH), where I pinpointed three stocks that earned Morningstar's wide moat ratings.

Here are those three stocks:

#1 Graco (GGG)

Identifying themselves as the global leader in fluid handling, Graco specializes in engineering a diverse range of products designed to efficiently transport liquids to specific destinations. One of its primary revenue streams revolves around supplying sprayers for the application of paint to walls and various structures.

Graco's competitive advantage lies in its exceptional engineering capabilities and an extensive portfolio of niche products - Graco derives half of its revenue from 60,000 different stock-keeping units, with an average of just one unit sold per day.

Moreover, Graco boasts a substantial installed equipment base, with many of its products serving critical roles and seamlessly integrating into customers' production processes. These products typically represent a relatively minor portion of a customer's overall production costs, which minimizes the incentive for customers to switch to alternative suppliers.

Graco consistently achieves a robust profit margin, averaging around 20% over numerous years. Additionally, its efficiency is underscored by impressive Return on Assets (ROA) and Return on Equity (ROE) figures, at 20% and 26%, respectively.

With a track record of 18 consecutive years of dividend per share increases, Graco has also delivered an impressive total return of 233% (equivalent to an annualized return of 13%) over the last decade.

Morningstar has assigned a fair value of $75, while the general consensus among analysts stands at $85. At the time of writing, Graco's shares are trading around $75, indicating that they are currently priced fairly.