Is it Time to Sell These Stocks?

THE VALUE INVESTOR: These UK stocks are rated one or two stars, meaning they are trading at a share price greater than their fair value estimate

Emma Wall 21 August, 2014 | 12:02PM
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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

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
AstraZeneca PLC11,022.00 GBX-0.18Rating
BT Group PLC140.25 GBX1.45Rating
General Motors Co50.96 USD0.39Rating
Smith & Nephew PLC966.80 GBX0.60Rating
United Utilities Group PLC Class A1,034.00 GBX1.12Rating

About Author

Emma Wall  is former Senior International Editor for Morningstar

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