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Market Fair Value Update: Utilities Sector Looks Pricey

With the market trading at a premium valuation, communication services is the cheapest sector.

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This is the Market Fair Value update for Friday, Nov. 24. The Market Fair Value 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.

The current 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 Oct. 5 and a 52-week low of 0.97 reached on Aug. 24.

Valuations across sectors are quite uneven. The most overvalued sector is still utilities at 1.12--that's 12% 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 communications services at 0.90--that's 10% below our estimate of intrinsic value. Some of our top picks in the communications services sector include Comcast, BT Group, and KDDI Corp.

Morningstar.com does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.