Skip to Content
US Videos

What Sectors Are Most Undervalued?

We offer three picks in the most undervalued sector, energy.

Editor’s note: Read the latest on how the coronavirus is rattling the markets and what investors can do to navigate it.

Given the market turmoil we’ve experienced during the past few weeks, it’s time check in on the Morningstar Market Fair Value.

This metric 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 0.74. This indicates that the market is about 26% undervalued today. The market hasn’t been this undervalued by our metrics since 2011.

No sector is overvalued today. With a ratio of 0.85, the consumer defensive and utilities sectors are the closest to fairly valued.

In particular, utilities have been overvalued for a long time, as investors have sought out these stocks for their high yields. This pullback in prices offers a buying opportunity for investors.

The most undervalued sector is energy at 0.44--that's 56% below our estimate of intrinsic value.

Some of our top picks in the energy sector include Diamondback Energy (FANG), Enbridge (ENB), and Cenovus Energy (CVE).

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.