Seeking Value Among Large-Cap Medalists
Morningstar's price/fair value measure points to few undervalued options among the best U.S. large-cap funds.
Even though they’ve pulled back recently, U.S. large-cap stocks may not seem like fertile grounds for bargain-hunters after three straight years of double-digit gains. In fact, Morningstar’s analysis confirms the suspicion that values are scarce for large-cap fund investors.
Morningstar's stock analysts have developed a measure of fair value, using a proprietary discounted cash flow model to assess the more than 1,200 mostly large-cap names they cover. A stock with a price/fair value ratio greater than 1.0 is considered overvalued. By the end of 2013’s speculative rally, the median stock had a price/fair value ratio of 1.06. It remained overvalued through much of 2014, though it dipped down to 1.0 by December. As of April 1, it was back up to 1.02.
Laura Lallos has a position in the following securities mentioned above: KO. Find out about Morningstar’s editorial policies.