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Quarter-End Insights

Financial Services Is Undervalued Based on Long-Term Fundamentals

Berkshire an ideal defensive investment for the long term.

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The Morningstar US Financial Services Index has significantly underperformed the Morningstar US Markets Index quarter to date, down 26.2% compared with 19.1%, and year to date, down 10.3% compared with 6.4%. That said, the median North America-based financial-services stock trades at a 27% discount to its fair value estimate, so we consider the North American financial sector undervalued. The valuation of financials has rapidly changed from a quarter ago, when the median financial sector stock was 3% overvalued.

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