2 Scary Stocks

Susan Dziubinski: Hi I'm Susan Dziubinski with Morningstar. U.S. stocks have posted frightening returns in 2022. After such gruesome performance, Morningstar estimates that U.S. stocks are about 18% undervalued.

But that doesn’t mean all stocks are screaming bargains—in fact, some still seem fiendishly overpriced to us. Today we’re looking at two overvalued stocks trading at scary prices.

2 Scary Stocks

These 1- and 2-star stocks are considered overpriced. Data as of Oct. 27, 2022.

1. Marathon Oil MRO
2. Dick's Sporting Goods DKS

The first scary stock is Marathon Oil MRO. The independent exploration and production company has reshuffled its portfolio and is doubling down on U.S. shale. Like many shale companies, Marathon is prioritizing shareholder distributions rather than production growth. We don’t think the company has significant competitive advantages in the E&P space and, like most E&P firms, Marathon faces material ESG risk. We think the stock is expensive at today’s price and is worth just $18 per share.

The second spooky stock on our list is Dick’s Sporting Goods DKS. While Dick’s is the largest independent sporting goods chain in the U.S., we think the company lacks an edge as sporting goods are sold through many channels. Intense competition from e-commerce platforms like Amazon.com AMZN, mass-market retailers like Walmart WMT, and specialty stores such as Nike NKE has reduced Dick’s customer traffic and eroded its operating margins. The stock looks expensive to us: We think shares are worth $78 each.

Thanks for tuning in. For more stock investing insights—spooky and otherwise—subscribe to Morningstar’s channel and visit Morningstar.com.

Morningstar director Dave Meats and analyst David Swartz contributed the research behind this segment.

Watch 2 Cheap Defensive Stocks for more from Susan Dziubinski.