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Mine for Values in These Sectors

Stocks in the basic materials, communication services, and energy sectors are providing some of the best opportunities in the market today.

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Despite worries about growth in the United States and the European sovereign debt crisis, the last few weeks and months have been surprisingly good to stock investors. The broad-based U.S. Market Index is up 3.4% during the past four weeks, almost 13% year to date, and more than 20% during the last year.

Has this runup in stock prices left equities too pricey? Last weekend we looked at some defensive sectors that do appear to have very full valuations. Investors looking for income and safety have bid up the real estate, consumer defensive, and utilities sectors to prices higher than Morningstar analysts' fair value estimates. But just because some areas of the market are expensive doesn't mean that there are no values to be found. Stocks as a whole remain modestly undervalued, with a median price/fair value ratio of 0.93, and some areas of the market look even cheaper.

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Jeremy Glaser does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.