Strong Market Lifts More Stocks Above Fair Values
Energy remains the cheapest sector under Morningstar coverage, and consumer cyclical looks attractive, particularly travel and leisure firms.
With the Morningstar US Market Index climbing nearly 10% in the fourth quarter of 2019, the median stock in our North American coverage now trades at a 3% premium to our fair value estimate compared with a 2% discount near the end of the third quarter. Of the roughly 800 North American stocks we cover, 32% have an overvalued rating of 1 or 2 stars compared with only 21% with an undervalued rating of 4 or 5 stars. Only three of the 11 sectors we cover have a median stock with a price/fair value ratio below 1: energy, consumer cyclical, and communication services.
Energy Continues to Hold the Largest Share of Buying Opportunities - source: Morningstar