Stock Market Outlook: Energy Sector Again Looks Undervalued
U.S. and Canadian stocks are fairly valued overall, with energy offering the most opportunity and utilities the least.
U.S. and Canadian stocks, which account for about half of our 1,500-plus global equity coverage, look fairly valued in aggregate. The median North American stock trades at a 2% discount to our intrinsic value estimate (Exhibit 1), and the share of 4- and 5-star-rated stocks only slightly exceeds that of 1- and 2-star-rated stocks (30% to 27%). Across the 11 sectors, we continue to see the most opportunities in energy and the least in utilities, where share prices have become increasingly delinked from long-term cash flow prospects as investors hunt for yield.
Daniel Rohr does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.