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Each week, we screen the US-listed stocks under Morningstar’s coverage for newly undervalued names.
For the week ended Jan. 3, seven stocks saw their Morningstar Ratings change to 4 stars, while another six dropped into 5-star territory. Stocks rated 3 stars are fairly valued according to Morningstar analysts, while those rated 1 or 2 stars are considered overvalued.
The five new 5-star stocks with the largest market capitalization are:
• NetEase NTES
• Crown Castle International CCI
• Basf BASFY
• Brown-Forman BF.B
• Under Armour UAA
The five new 4-star stocks with the largest market capitalization are:
• Diageo DEO
• MongoDB MDB
• TransUnion TRU
• Equity Lifestyle Properties ELS
• Molson Coors Beverage Company TAP
The full lists of new 4- and 5-star stocks are at the bottom of this story. All returns in this article are reported in the stock’s base currency, and all data is sourced from Morningstar Direct.
Newly Undervalued Stocks for the Week Ended Jan. 3
The Morningstar US Market Index fell 0.32% over the past week, leaving the overall US stock market moderately overvalued, hovering at a 9% premium to its fair value estimate on a cap-weighted basis.
Of the 873 US-listed stocks covered by Morningstar analysts:
• 36% are undervalued, 39% are fairly valued, and 24% are overvalued.
• Seven are newly undervalued.
• One is newly overvalued.
• Six moved from a 4-star rating to a 5-star rating.
• One moved from a 5-star rating to a 4-star rating.
• Among the newly undervalued stocks, none jumped from a 3-star rating to a 5-star rating.
• Two are no longer undervalued.
Morningstar analysts assign every stock under their coverage a fair value estimate, which is an intrinsic measure of the stock’s worth, and an Uncertainty Rating, which captures the range of potential outcomes for that estimate. A higher Uncertainty Rating equates to a larger range of prices considered fairly valued. These two metrics and the stock’s current price determine its Morningstar Rating.
Distribution of Star Ratings for US-Listed Stocks
Data is for US-listed stocks currently under analyst coverage.
Source: Morningstar Direct.
Metrics for this Week’s New 5-Star Stocks
NetEase
• Morningstar Rating: 5 stars
• One-Week Return: -3.53%
Electronic gaming company NetEase is down 12.59% over the past three months and 5.90% over the past year. The stock’s price is 44% below its fair value estimate of $158 per share, with an Uncertainty Rating of High. The large-core stock has a narrow economic moat.
Crown Castle International
• Morningstar Rating: 5 stars
• One-Week Return: -0.63%
Specialty REIT Crown Castle has dropped 19.99% over the past three months and 15.86% over the past year. The stock is trading at a 33% discount to its fair value estimate of $135 per share, with an Uncertainty Rating of Medium. Crown Castle is a mid-value company with a narrow economic moat.
Basf
• Morningstar Rating: 5 stars
• One-Week Return: -3.53%
Chemical company Basf has lost 18.19% over the past three months and 12.11% over the past year. The large-value stock has a narrow economic moat. Basf is trading at a 33% discount to its fair value estimate of $16 per share, with an Uncertainty Rating of Medium.
Brown-Forman
• Morningstar Rating: 5 stars
• One-Week Return: -6.62%
Alcoholic beverages company Brown-Forman is down 23.46% over the past three months and 33.77% over the past year. The stock’s price is 34% below its fair value estimate of $55 per share, with an Uncertainty Rating of Medium. The mid-core stock has a wide economic moat.
Under Armour
• Morningstar Rating: 5 stars
• One-Week Return: -0.24%
Apparel manufacturing company Under Armour has lost 2.79% over the past three months and gained 2.20% over the past year. The small-core stock has no economic moat. Under Armour is trading at a 42% discount to its fair value estimate of $14.50 per share, with an Uncertainty Rating of High.
Metrics for this Week’s New 4-Star Stocks
Diageo
• Morningstar Rating: 4 stars
• One-Week Return: -4.37%
Alcoholic beverages company Diageo is down 11.79% over the past three months and 12.59% over the past year. The stock’s price is 8% below its fair value estimate of $132 per share, with an Uncertainty Rating of Low. The large-core stock has a wide economic moat.
MongoDB
• Morningstar Rating: 4 stars
• One-Week Return: 3.37%
Software infrastructure firm MongoDB has lost 2.61% over the past three months and 33.94% over the past year. The mid-growth stock has no economic moat. MongoDB is trading at a 15% discount to its fair value estimate of $290 per share, with an Uncertainty Rating of High.
TransUnion
• Morningstar Rating: 4 stars
• One-Week Return: -1.52%
Financial data firm TransUnion has dropped 13.33% over the past three months and climbed 45.11% over the past year. The stock is trading at an 18% discount to its fair value estimate of $113 per share, with an Uncertainty Rating of High. TransUnion is a mid-growth company with a wide economic moat.
Equity Lifestyle Properties
• Morningstar Rating: 4 stars
• One-Week Return: 1.79%
Residential REIT Equity Lifestyle is down 2.2% over the past three months and up 0.6% over the past year. The stock’s price is 11% below its fair value estimate of $76 per share, with an Uncertainty Rating of Medium. The mid-core stock has no economic moat.
Molson Coors Beverage Company
• Morningstar Rating: 4 stars
• One-Week Return: -4.41%
Alcoholic beverages company Molson Coors has climbed 0.25% over the past three months and dropped 8.13% over the past year. The stock trades at a 15% discount to its fair value estimate of $65 per share, with an Uncertainty Rating of Medium. Molson Coors is a mid-value company with no economic moat.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
