Warren Buffett made his millions finding stocks that trade at less than their intrinsic value – and selling them on when they become fairly valued. The Sage of Omaha has recently picked up more stock in troubled company General Motors (GM), which has lost significant value this year.
Morningstar equity analysts use their research to determine a share’s Fair Value, and from this they award it a star rating. A stock with a five star rating is trading at significantly less than its Fair Value – and one that has been awarded one star is considered by analysts to have a share price much greater than the Fair Value estimate.
There are two one-star stocks in the UK stock market at the moment, and seven two-star stocks. The following five stocks are currently rated as over-valued by Morningstar equity analysts, which could be a trigger for investors to consider trimming their position and taking some profit.
Smith & Nephew (SN.)
Star Rating:
Smith & Nephew designs, manufactures, and markets orthopedic devices and wound-care solutions. Approximately three fourths of the U.K.-based firm's revenue comes from knee replacements, hip implants, nails, fixation devices, and arthroscopy tools.
United Utilities (UU.)
Star Rating:
United Utilities Group is primarily a holding company for United Utilities Water, the country's largest regulated water and wastewater utility, serving customers in northwest England, including Manchester and Liverpool.
ARM Holdings (ARM)
Star Rating:
ARM Holdings licenses microprocessor intellectual property and silicon physical layer designs and provides related development software and technologies, which support applications in mobile devices, automobiles, and other electronic products.
AstraZeneca (AZN)
Star Rating:
The company sells branded pharmaceutical products across several major therapeutic classes, including gastrointestinal, cardiovascular, respiratory, cancer, immunology, neuroscience, and infectious disease.
BT Group (BT.A)
Star Rating:
BT Group, formerly known as British Telecom, is the incumbent phone operator and largest supplier of fixed-line phone services in Britain with about 38% market share. BT is the largest supplier of high-speed Internet lines, including lines it wholesales.
We found these one and two-star stocks using the filter function on Morningstar Select