Skip to Content
US Videos

Utilities Look Expensive but Some Value in Consumer Cyclical

The market as a whole still looks overvalued, but there are a few sectors that look less pricey.

Mentioned: , ,

Is the market cheap or expensive? What sectors offer the best opportunity today? This is the market fair value update for Saturday, May 27.

The market fair value shows the median price/fair value ratio of all of the individual stocks we cover. In essence it shows how big of a gap, on average, we see between market prices and our estimate of intrinsic value across the entire market or a specific sector.

 

Today's ratio for all rated stocks is 1.03. This indicates that the market is overvalued, but slightly less so than it was in March when the ratio hit its 52-week high of 1.05. The lowest it's been over the last year is 0.95 in June of 2016.


Valuations across sectors are quite uneven. One of the most overvalued sectors is utilities at 1.10--that's 10% above our estimate of intrinsic value. Utilities stocks have been driven up by, among other reasons, investors seeking income in the current low-yield environment.

The most undervalued sector is consumer cyclical at 0.97--that's 3% below our estimate of intrinsic value.


Some of the stocks in the consumer cyclical sector that look most attractive today are Hanesbrands, Tractor Supply, and Williams-Sonoma.


Morningstar.com does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.