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Still a Few Pockets of Value Left in Market

As the fourth quarter kicks off, most sectors look pricey, but consumer cyclical looks a touch undervalued.

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Is the market cheap or expensive? What sectors offer the best opportunity today? This is the Market Fair Value Update for Friday, Oct. 6.

The Market Fair Value shows the median price to fair value ratio of all of the individual stocks we cover. In essence, it shows how big of a gap, on average, we see between market prices and our estimate of intrinsic value across the entire market or a specific sector. 

At the start of the fourth quarter, the ratio for all rated stocks is 1.03. This indicates that the market is slightly overvalued. That compares to a 52-week high of 1.06 seen on March 1 and a 52-week low of 0.96 reached in November 2016. 

Valuations across sectors are uneven, and the extremes remain unchanged over the last quarter. The most overvalued sector is still utilities at 1.21--that's 21% above our estimate of intrinsic value. Utilities stocks have been driven up by, among other reasons, investors seeking income in the continued low-yield environment. The most undervalued sector is consumer cyclical at 0.94--that's 6% below our estimate of intrinsic value. 

Our stock analysts recently shared 30 firms they see as undervalued, including Allergan, Qualcomm, and Advance Auto Parts. does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.