What are we looking for?
Undervalued U.S. stocks.
How we did it
Craig McGee, senior account manager at CPMS Morningstar Canada, used his company’s proprietary quantitative rating system to find U.S. stocks that might appeal to bargain hunters. The Morningstar ratings are based on a statistical model and include an estimate of each stock’s fair value as well as several other measurements of a stock’s quality. Mr. McGee selected the 20 most undervalued stocks that also met three additional criteria:
A narrow or wide “Economic Moat.” A moat describes the strength of a company’s competitive position, with a wide moat indicating a strong, sustainable advantage over rivals.
Valuation uncertainty calculated as low or medium. This rating reflects Morningstar’s level of uncertainty about the accuracy of its quantitative fair value estimate.
Financial health calculated as strong or moderate. This rating reflects the probability that a company will face financial distress in the near future.
The 20 stocks listed in the accompanying table are sorted based on how far they’re trading below their estimated fair value.
Morningstar Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individuals, financial advisers and institutions.
Morningstar provides data on approximately 422,000 investment offerings, including stocks, mutual funds and similar vehicles, along with real-time global market data on more than nine million equities, indexes, futures, options, commodities and precious metals, in addition to foreign exchange and treasury markets.
What did we find?
An indication that Carl Icahn might be on to something. The activist investor galvanized Apple Inc.’s share price this week when he tweeted that he thought the tech giant was deeply undervalued. The Morningstar evaluation (which is based on prices as of Monday) concurs.
U.S. quantitative valuations
|4||Marathon Petroleum Corp.||MPC-N||22,870|
|5||National Oilwell Varco, Inc.||NOV-N||31,149|
|9||Occidental Petroleum Corp.||OXY-N||71,141|
Prices in U.S. dollars. Source: Morningstar Canada
|4||Marathon Petroleum Corp.||MPC-N||22,870||73.05||85.65||17.25%||Narrow||Medium||Moderate|
|5||National Oilwell Varco, Inc.||NOV-N||31,149||72.86||85.25||17.01%||Wide||Low||Strong|
|9||Occidental Petroleum Corp.||OXY-N||71,141||88.29||98.13||11.14%||Narrow||Low||Strong|
|11||Health Care REIT, Inc.||HCN-N||18,079||63.14||69.3||9.75%||Narrow||Medium||Moderate|
|13||Berkshire Hathaway Cl B||BRK.B-N||273,752||117.13||127.31||8.69%||Wide||Medium||Strong|
|14||Noble Energy Inc.||NBL-N||22,766||63.42||68.79||8.46%||Narrow||Medium||Strong|
|16||Kinder Morgan, Inc.||KMI-N||38,741||37.4||40.19||7.46%||Wide||Medium||Moderate|
|18||Spectra Energy Corp.||SE-N||23,286||34.79||37.34||7.34%||Wide||Medium||Moderate|
|19||Fidelity National Fin. Inc.||FNF-N||5,667||24.83||26.65||7.33%||Narrow||Medium||Moderate|
- Apple Inc$93.24-0.38(-0.41%)
- CenturyLink Inc$28.20-2.76(-8.91%)
- Phillips 66$79.08-0.24(-0.30%)
- Marathon Petroleum Corp$36.09-0.13(-0.36%)
- National Oilwell Varco Inc$33.29-0.18(-0.54%)
- HollyFrontier Corp$30.04-1.12(-3.59%)
- Halliburton Co$39.94+0.08(+0.20%)
- Hess Corp$55.88+0.56(+1.01%)
- Occidental Petroleum Corp$76.14+2.18(+2.95%)
- Carnival Corp$48.39-0.77(-1.57%)
- Welltower Inc$73.73-0.65(-0.87%)
- Berkshire Hathaway Inc$143.88-0.36(-0.25%)
- Noble Energy Inc$35.17-0.32(-0.90%)
- Oracle Corp$39.23-0.06(-0.15%)
- Kinder Morgan Inc$17.14-0.01(-0.06%)
- Express Scripts Holding Co$72.95+0.21(+0.29%)
- Spectra Energy Corp$31.33+1.10(+3.64%)
- Fidelity National Financial Inc$32.81+0.09(+0.28%)
- Schlumberger NV$75.40-0.33(-0.44%)
- Updated May 5 4:00 PM EDT. Delayed by at least 15 minutes.