Call me nosy, but I love looking at top ten holdings. I recently looked at the biggest holdings of Morningstar Gold Medalist rated funds, hunting for shares that also command a four or five-star Morningstar rating.

Criteria 1: Gold medalist funds

Morningstar’s Medalist ratings indicate which funds and ETFs Morningstar believes are likely to outperform a relevant index or peer group on a risk-adjusted basis over time.

Funds and ETFS are evaluated on three key pillars (People, Parent, and Process). These are coupled with a fee assessment before being ranked against other funds in the same Morningstar Category, which represents funds and ETFs that follow similar investment strategies.

Criteria 2: Four or five star stocks

A four- or five-star rating means our analysts think that a stock is trading at an attractive discount to our Fair Value estimate. These shares may represent an opportunity if they align to your investment strategy.

I wanted these stocks to be in the fund’s top ten holdings as per the latest Morningstar data. These positions may have fallen in value or been sold since then. But it was the best way I could think of to find cheap stocks with the seal of approval from high quality managers.

Remember that individual stocks and funds should only be considered as part of a broader investing strategy. For a step-by-step guide to making a strategy, read this article by my colleague Mark LaMonica.

AUB Group (AUB)

Our first pick comes from the November 30 top holdings of ICE Fund, an Aussie equity option that Steven Le from our manager research team calls a "standout quality-growth strategy with a small- and mid-cap focus".

AUB Group operates the second-largest general insurance broker network in Australia and New Zealand. AUB holds an ownership position in all of the brokers in the network, which provides around half of the group’s overall profit with other contributions from its Tysers business in the UK and its underwriting agency segment.

Brokers join AUB's broker network to benefit the strong relationships that AUB has with insurers due to its scale. This allows AUB’s brokers to offer policies with more favorable policy wording and pricing to their clients and win more business.

AUB's scale also provides the capacity to spend more on technology and marketing, while other services such as claims support and premium funding support the value proposition to brokers and end clients even further.

Zaia has awarded AUB a Narrow Moat rating, which means he thinks it has competitive advantages sustainable for at least the next decade. This is underpinned by what Zaia sees as switching costs for AUB's broker network members and the brokers' end clients.

Clients face uncertain benefits from switching to an alternative broker who doesn't understand their business as well and can't tailor insurance policies to their unique needs. Meanwhile, AUB's stake in each broker provides a barrier to them leaving the network. Brokers also have little reason to leave if AUB delivers on providing them with access to better products and pricing.

AUB’s shares have started 2025 weakly, perhaps on fears that insurance premium growth (of which AUB’s brokers take a slice in commissions) could soften after a strong couple of years. Nathan thinks these concerns may have gone too far, and shares now trade considerably below his Fair Value estimate of $34 per share.

Nathan's Fair Value estimate relies mostly on AUB outgrowing his forecast of 7.5% annual growth in Australian insurance written premiums over the next five years. Given the benefits that AUB's network of brokers enjoy versus smaller players, he feels that AUB is in a strong position to do this.

AUB Group

  • Economic moat: Narrow
  • Fair Value estimate: $34 per share
  • Share price Feb 19th: $27.81
  • Star rating: Four stars

Auckland International Airport (AIA)

Our next pick comes from the top holdings of Yarra Australian Smaller Companies as of December 30, which Steven Le describes as “an exceptional domestic small-cap offering, which is a credit to its skillful team”.

As of December 30th, Auckland International Airport was the fund’s biggest holding with a 4.7% weighting. As the only airport in what is by far New Zealand’s biggest city, AIA is the primary international gateway to New Zealand and also the country’s main hub for domestic flights.

Aeronautical revenues, which comprise mainly of landing fees and per passenger charges, make up half of overall revenue and are regulated to ensure that AIA doesn’t abuse its monopoly. The other half of revenue comes from retail rents, other property income and services such as car parking.

Our AIA analyst Angus Hewitt has awarded Auckland a Wide Moat rating thanks to its monopoly position and the low likelihood of a competing airport being constructed.

He thinks that Auckland Airport’s significant capital expenditure plans, which include building a new terminal and ground transport facilities, have spooked investors. Meanwhile, there are concerns that its proposed fee increases from 2026 will face opposition from regulators.

Angus thinks the concerns on AIA’s regulated income from 2026 are valid, however, he thinks this uncertainty has brought about an attractive entry point into an irreplaceable asset.

His Fair Value estimate for the shares of NZD $9.50 or A$8.60 is more than 10% ahead of the recent share price. His forecast bakes in 12% average annual earnings growth as passenger numbers continue to recover to pre-pandemic levels and grow slowly thereafter.

Auckland International Airport

  • Economic moat: Wide
  • Fair Value estimate: A$8.60 per share
  • Share price Feb 19th: A$7.58
  • Star rating: Four stars

Woodside Energy (WDS)

Lazard’s Select Australian Equity boasts “a highly experienced team with a disciplined value-oriented process” says our manager research analyst Zunjar Sanzgiri, who notes that the fund’s concentrated approach holds the potential for returns to diverge signifcantly from the benchmark.

This approach is visible in the fund’s top ten holdings as of December 30, which feature a plethora of hefty positions in four- and five-star Morningstar rated stocks. This included a 7.4% position in Woodside Energy, which recently returned to our best Australia and NZ equity ideas list.

Our energy analyst Mark Taylor views Woodside as Australia’s premier oil and gas company thanks to its operations across liquid natural gas, natural gas, condensate and crude oil. LNG interests in the North West Shelf Joint Venture and Pluto offshore Western Australia are the firm’s mainstay, and the low-cost advantage of these assets form the company’s foundation.

A big chunk of Mark’s intrinsic value estimate for Woodside comes from future project development. This is both a complicated and expensive endeavor, but it is one that Woodside has excelled in for over 25 years and has unparalleled experience domestically.

Woodside also benefits from 20-year off-take agreements several blue-chip Asian energy utilities including Tokyo Electric, Kansai Electric, Chubu Electric, and Osaka Gas. These help ensure sufficient project financing during development and should also add stability to cash flows after completion.

Woodside's deep development pipeline is backed up by what Taylor views as an attractive medium-term demand picture for gas, which is a far cleaner energy source than coal and therefore should play an important role in reducing global emissions.

Adding to Woodside's attraction is that its strong cashflow and a healthy balance sheet should support the continued payment of fully-franked dividends. At a recent share price of around $23, Woodside offered a trailing dividend yield of over 8% and traded far below Taylor's $41.50 per share Fair Value estimate.

Woodside Energy

  • Economic moat: None
  • Fair Value estimate: $41.50 per share
  • Share price Feb 19th: $23.03
  • Star rating: Five stars

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Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company's future cash flows, resulting from our analysts' independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn more about how to identify companies with an economic moat, read this article by Mark LaMonica.