7 New 4-Star Stocks

Each week, we screen the US-listed stocks under Morningstar’s coverage for newly undervalued names.

For the week ended Oct. 18, seven stocks dropped into undervalued territory, meaning their Morningstar Ratings changed to 4 or 5 stars. Stocks rated 3 stars are fairly valued according to Morningstar analysts, while those rated 1 or 2 stars are considered overvalued. The seven newly undervalued stocks, ordered by market cap, are:

• Elevance Health ELV
• JD.com JD
• Honda Motor HMC
• Li Auto LI
• Smurfit WestRock SW
• Nio NIO
• Bio-Techne TECH

All data in this article is sourced from Morningstar Direct.

New 4-Star Stocks for the Week Ended Oct. 18

The Morningstar US Market Index rose 0.91% over the past week, leaving the overall US stock market significantly overvalued, hovering at a 10% premium to its fair value estimate on a cap-weighted basis.

Of the 888 US-listed stocks covered by Morningstar analysts:

• 30% are undervalued, 42% are fairly valued, and 28% are overvalued.
• Seven are newly undervalued.
• 20 are newly overvalued.
• Zero moved from a 4-star rating to a 5-star rating.
• Two moved from a 5-star rating to a 4-star rating.
• 10 are no longer undervalued.

Morningstar analysts assign every stock under their coverage a fair value estimate, which is an intrinsic measure of its worth, and an uncertainty rating, which captures the range of potential outcomes for that estimate. A higher uncertainty rating equates to a larger range of prices considered fairly valued. These two metrics and the stock’s current price determine its Morningstar Rating.

Metrics for this Week’s New 4-Star Stocks

Elevance Health

• Morningstar Rating: 4 stars
• One-Week Return: -14.17%

Healthcare plans company Elevance has lost 14.40% over the past three months and 7.07% over the past year. The large-value stock has a narrow economic moat. Elevance is trading at a 22% discount to its fair value estimate of $550, with a medium uncertainty rating.

JD.com

• Morningstar Rating: 4 stars
• One-Week Return: -8.78%

Internet retail company JD has climbed 52.13% over the past three months and 58.98% over the past year. The stock is trading at a 20% discount to its fair value estimate of $50, with a high uncertainty rating. JD is a large-core company with a wide economic moat.

Honda Motor

• Morningstar Rating: 4 stars
• One-Week Return: -2.30%

Auto manufacturer Honda is down 2.79% over the past three months and 4.51% over the past year. The stock’s price is 19% below its fair value estimate of $38, with a high uncertainty rating. The large-value stock has no economic moat.

Li Auto

• Morningstar Rating: 4 stars
• One-Week Return: -6.65%

Auto manufacturer Li has gained 25.62% over the past three months and lost 22.90% over the past year. The large-growth stock has no economic moat. Li is trading at a 23% discount to its fair value estimate of $32.80, with a very high uncertainty rating.

Smurfit WestRock

• Morningstar Rating: 4 stars
• One-Week Return: -2.74%

Packaging and containers company Smurfit WestRock has dropped 4.61% over the past three months and climbed 37.07% over the past year. The stock is trading at a 19% discount to its fair value estimate of $55, with a high uncertainty rating. Smurfit WestRock is a large-value company with no economic moat.

Nio

• Morningstar Rating: 4 stars
• One-Week Return: -16.35%

Auto manufacturer Nio is up 14.98% over the past three months and down 34.01% over the past year. The stock’s price is 31% below its fair value estimate of $7.60, with a very high uncertainty rating. The large-value stock has no economic moat.

Bio-Techne

• Morningstar Rating: 4 stars
• One-Week Return: -2.89%

Biotechnology firm Bio-Techne has lost 6.06% over the past three months and gained 7.93% over the past year. The mid-core stock has a narrow economic moat. Bio-Techne is trading at an 18% discount to its fair value estimate of $87, with a high uncertainty rating.