Morningstar provides in-depth research reports for a universe of approximately 200 health-care stocks, but only have been granted the coveted wide-moat designation. Many of our readers are familiar with how we assign economic moats–in a nutshell, it’s a process in which we assess the long-term competitive advantages of a firm, as well as its ability to generate strong returns on investment in its business. However, these moats aren’t set in stone. Industry dynamics, internal company evolution, and big acquisitions can cause moats to change with time.

When we boost a company from no moat to narrow–or from narrow to wide–it can have a meaningful effect on our fair value estimate. To reflect the firm’s improved position, we make various changes to our valuation models; most importantly, we lengthen the time that it can generate superior returns, and we discount future cash flows at a lower rate. For example, taking a look at the health-care sector, we recently boosted http://quicktake.morningstar.com/Stock/MorningstarAnalysis.asp?Country=USA&Symbol=GENZ http://quote.morningstar.com/Switch.html?ticker=GENZ economic moat from narrow to wide, and simultaneously raised our fair value estimate by almost 20%. While this biotech has its roots in rare disease treatments, we now see long-term strength in other segments of its business, increasing our confidence in the firm’s continued solid performance.

Of course, firms seldom prove they are worthy of a wider economic moat overnight. In fact, as profiled in our http://www.morningstar.com/Products/Store_StocksMGI.html newsletter, we cover several companies that we think are digging wider moats. These “emerging moat” companies are often at a transitional phase, and we aren’t quite ready to jump on board and assume new products or recent acquisitions will perform as well as management hopes. In future articles, we’ll be taking a look at stocks in other sectors that we think are also on the cusp of achieving a wider moat.

All three of the health-care firms we’ve chosen to profile todayare currently trading in 3-star (fairly valued) territory. However, we would advise investors to stay tuned; there could be significant upside to their long-term values in the future.

If you’d like to track and analyze these stocks, to create a watch list. Then simply click “Continue,” name your watch list, and click “Done.” (If this link does not work, please http://members.morningstar.com/prism/registrationFree.html?referid=A1151–registration is free–or sign in if you’re already a member, and try again.) This will allow you to save and monitor these holdings within our http://portfolio.morningstar.com/NewPort/Reg/AllView.aspx.

Amylin Pharmaceuticals http://quote.morningstar.com/Switch.html?ticker=AMLN
Business Risk: Above Average
Economic Moat: None
Amylin’s simultaneous launch of two novel injectable diabetes drugs in 2005 quickly brought the firm to the attention of biotech investors. The company just reported $430 million in 2006 sales of Byetta. This drug’s ability to control blood glucose while promoting weight loss gives it a unique position in an increasingly competitive market. A long-acting version of Byetta is in the works, which would make the drug more convenient to the 3.5 million patients who aren’t well controlled on oral drugs.

However, most of Amylin’s value is still riding on the success of Byetta and its long-acting counterpart, known as Exenatide LAR. As I discussed in a recent http://quicktake.morningstar.com/Stock/MorningstarAnalysis.asp?Country=USA&Symbol=AMLN, “If pipeline development is fruitful and Amylin proves that its competitive advantage extends beyond the exenatide molecule, we believe this biotech would warrant a narrow economic moat.” We’re waiting to see if Amylin’s other marketed drug, Symlin, can begin to see better market uptake with an expanded label this year, and if the firm’s potential for finding a safe and effective obesity treatment starts to unfold as planned.

Alkermes http://quote.morningstar.com/Switch.html?ticker=ALKS
Business Risk: Above Average
Economic Moat: None
A specialist in novel drug-delivery technologies, Alkermes has shown that its injectable extended-release technology has market appeal. Alkermes’ improved version of http://quicktake.morningstar.com/Stock/MorningstarAnalysis.asp?Country=USA&Symbol=JNJ http://quote.morningstar.com/Switch.html?ticker=JNJ Risperdal is seeing strong market uptake, and investors are waiting to see if the same technology can make Amylin’s Byetta an even more successful product. In addition, Alkermes has pulmonary technology that is being used to develop an inhaled form of insulin.

However, the company only retains a small portion of profits from these programs, and Alkermes’ success is riding on Vivitrol, an injectable alcohol dependence drug. Until we see evidence of strong sales from this product, we’re not quite ready to say that Alkermes will be able to sustain a high level of profitability for the long-term. As Heather Brilliant states in her http://quicktake.morningstar.com/Stock/MorningstarAnalysis.asp?Country=USA&Symbol=ALKS, “We think Alkermes may be on its way to digging a narrow moat, with several proven applications of its technology now on the market, solid partnerships with leading pharmaceutical firms, and a respectable pipeline of potential future products.”

Kyphon http://quote.morningstar.com/Switch.html?ticker=KYPH
Business Risk: Above Average
Economic Moat: Narrow
Kyphon’s niche in spinal orthopedics has been a valuable one–its patented kyphoplasty devices turned the firm profitable in 2003, and operating margins have been in the midteens ever since. Kyphon’s patent portfolio and foundation of successfully treated patients gave us confidence in the sustainability of Kyphon’s profitability, and we assigned the firm a narrow moat. However, with spinal market leaderhttp://quicktake.morningstar.com/Stock/MorningstarAnalysis.asp?Country=USA&Symbol=MDT http://quote.morningstar.com/Switch.html?ticker=MDT showing an interest in fighting its way into Kyphon’s niche, the firm’s dependence on one product line kept us from expanding the moat too wide.

Kyphon’s recent acquisition activity has the potential to transform the company, and if successful, could very well provide the diversification necessary to expand this moat. Newly acquired spinal assets from Disc-O-Tech Medical Technologies, as well as the acquisition of St. Francis Medical Technologies, fit well with Kyphon’s established niche. As Julie Stralow discusses in her http://quicktake.morningstar.com/Stock/MorningstarAnalysis.asp?Country=USA&Symbol=KYPH, “We think Kyphon is uniquely suited to address this potential market and take St. Francis’ devices to the next level. Adding this new growth driver to its product lineup also should temper some of the risks facing Kyphon.”

Ryanair, the low-cost airline, is being investigated by French prosecutors over advertisements for flights between Marseilles and Morocco that were cancelled.

The carrier, which put 3,000 tickets up for sale, says that it was forced to shelve the flights because France has yet to ratify an open-skies agreement between Brussels and Rabat.

Ryanair denies that it acted unlawfully and says that it has reimbursed its customers. However, a French judicial source said that prosecutors had opened a preliminary inquiry into allegations that Ryanair’s advertisements were misleading after receiving more than 40 formal complaints. Under French law, misleading advertising carries a maximum sentence of two years in prison and a fine of 37,500 (25,000).

Ryanair advertised the tickets for as little as 0.10 when it announced the opening of a French base at Marseilles airport in November.

Customers say that although Ryanair has paid back the cost of the tickets, it has failed to reimburse related expenses, such as deposits for hotels and hire cars. Matthieu Glasson, of Ryanair in France, said: Maybe we were a bit naive, but in no way did we use misleading advertisements.

FOR MANY people, trees only really come into focus when they become a problem. Those big green things down the end of the garden or in front of your house stand there, year in, year out, decade after decade. But until a force-nine gale comes along, and they fall on top of the car or the fence, or the extension, no one really takes much notice.

Indeed, neighbours’ trees are more likely to attract attention, especially if they block your light, overhang your garden or seem to be contributing to structural damage to your property. At this point, you’ll want to call in someone to deal with the problem. But who do you call, and how do you know they are any good?

First, don’t use anyone who says they’ll come round and do the job for 20 quid. Hiring a cowboy with a chain saw is a bit like employing Jade Goody to teach your children about racism: a Bad Idea. At best, they may prune the tree at the wrong time of year, making it more susceptible to disease. At worst, they may damage it irreparably.

Tree surgery is a dangerous job. It requires skill and training, rigorous safety measures, and insurance, none of which comes cheap. The bigger the tree, the bigger the crew you’ll need to deal with it. (Naturally, as an Independent reader, you will want to know that 100 per cent of what’s chopped down will be recycled, and even perhaps that the tree surgeon will use biodegradable chain oil if they’re working near ponds or streams.)

The first thing you should do is check with your local authority whether the tree is subject to a Tree Preservation Order, or whether you live in a conservation area. If this is the case, it doesn’t mean that you won’t be able to do anything, just that you will need written consent to proceed, even with pruning.

Your local authority is probably a good place to start anyway, as it will be able to provide lists of approved tree surgeons. Many also offer good advice on their websites, such as avoiding contractors who use the words “lopping” and “topping”, and those who come knocking. If your local council can’t provide a list of tree surgeons, it will probably point you in the direction of the Arboricultural Association.

This charity undertakes rigorous inspection of contractors on a regular basis (there is no government control) and has a complaints procedure. Its website will find you an approved contractor in your area, and will explain the difference between arboricultural consultants and tree surgeons, or, to give them their formal name, arboricultural contractors.

Basically, the first is the tree expert you would call if you have a query about the health or safety of a tree, its relationship with a property, or anything that might involve reports, surveys or legal issues. The second is the tree practitioner you would call if you want a tree pruned or removed. It is not unusual, says the association, for unscrupulous companies to say that they are listed when they are not, but this can easily be checked on the website or in the hard copy of its directory.

If the problem is a neighbour’s tree, the law is pretty clear. You can cut down branches that overhang your property (as long as you don’t trespass on their property to do so), but you must offer to return any timber or fruit. (Note that word “offer”: don’t just chuck branches over the fence - in my experience, finding that your plants have been flattened doesn’t lead to good neighbourly relations.)

Neither can you ask neighbours to take action about leaf-fall or sap dripping on to your car - these are viewed, unsurprisingly, as natural occurrences. And even subsidence problems involving tree roots should be dealt with initially by your buildings insurer, rather than by a solicitor.

The courteous thing to do is to have a word with your neighbours before you do anything. You never know, they may be co-operative (although expecting them to offer to contribute towards costs may be taking optimism a little too far). And if they’re not co-operative, at least you’ll have the satisfaction of having seized the moral high ground. Not to mention the high branch.

The Arboricultural Association (http://www.trees.org.uk; 01794 368 717)