Undervalued stocks with significant competitive advantages can make attractive long-term holdings. With that in mind, we scoured our 2,000-plus stock coverage universe for high-quality stocks (those boasting wide economic moats) that are trading on the cheap (rated 4 or 5 stars by our analysts).

Our analysts award wide economic moats to companies they believe possess durable competitive advantages that are likely to confer economic profits well into the future. In addition, our analysts estimate the fair value of each stock based on in-depth fundamental analysis. When a stock trades at a suitably wide discount to our estimate, we award it 4 or 5 stars. The wider the discount, the higher the star rating, and vice versa.

New variable annuity sales rose by 8.7% in the second quarter of 2010, to $33.9 billion from $31.2 billion in the first quarter. They were also up by 8.5% from the second quarter of 2009. This is the highest that new quarterly sales have been since 2008's third quarter. New sales rose by 6.6% for the year to date, to $65.15 billion.

Assets under management fell for the first time since the first quarter of 2009, primarily because of negative market returns. As of June 30, total assets in variable annuities were $1,318.9 billion, down 5.7% from first-quarter assets of $1,397.9 billion but still 11.3% higher than the $1,185.3 billion under management at the end of 2009's second quarter. Assets in fixed accounts increased by a very modest 0.3%, while assets in the equity class fell by 14.6%--a second straight quarterly decline. Meanwhile, assets in the moderate-allocation category, where 17% of separate account assets are invested, increased by 8% in the second quarter. Net flow of $6.2 billion in 2010's second quarter was 69% higher than reported net flow of $3.6 billion in the first quarter, which is a very positive trend.