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Investing Specialists

Our Ultimate Stock-Pickers' Top 10 Buys and Sells

The ongoing rally in the equity markets continues to limit the buying and selling activity of our top managers.

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By Greggory Warren, CFA | Senior Stock Analyst

With the market (as represented by the S&P 500 TR Index) up close to 30% through the end of November, and all three of the major U.S. indexes--the S&P 500 Index, the Dow Jones Industrial Average, and the Nasdaq--either hitting or approaching all-time highs this year, it looks like 2013 will go down as the strongest year of U.S. equity performance since the 2008-09 financial crisis. While the case could be made for solid stock market results in the year ahead, as evidenced by the returns generated in 2004 (following a 29% return for the S&P 500 TR Index in 2003) and 2010 (following a 26% return for the market in 2009), the market as a whole looks to be modestly overvalued right now, with Morningstar's stock coverage universe trading at 1.04 times our analysts' estimates of fair value (see the Market Fair Value based on Morningstar's Fair Value Estimates for Individual Stocks graph for more details). That said, in the two years--2004 and 2010--that followed periods with more than a 25% gain for the S&P 500 TR Index, the value of Morningstar's stock coverage universe continued to trade above our analysts' estimates of fair value, approaching 1.15 times our fair value estimates near the end of 2004 and peaking at around 1.10 times our fair value estimates during 2010, so it does not seem like valuation concerns were enough to temper enthusiasm for stocks during those periods (and are unlikely to do so in the year ahead).

The Morningstar Ultimate Stock-Pickers Team has a position in the following securities mentioned above: PG, MDLZ, PM, AMAGX. Find out about Morningstar’s editorial policies.