Take A Good Look For Today's Undervalued And Overvalued Sector
Through the market overall is fairly valued, basic materials stocks are the priciest while those in communication services sectors are attractive.
Market fair value shows the median price to 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.
As of November 17, the ratio for all rated stocks is 0.99 which indicates that the market is only on a slightly undervalued. This can be compared to a 52 week-high of 1.04 as seen back on September and a 52 week low of 0.86 that was reached in February.
According to data, the most overvalued sector is basic material at about 1.16 which is equivalent to 16% above our estimate of intrinsic value. According to data as well, this has been one of the best performing sector so far by this year rising to 16% but still they think that the market is too bullish on the prospect of the demands of the Chinese people.
If we have the most overvalued sector, we also have the most undervalued sector which is the sector in communication services. The said sector is at 0.87 which is equivalent to 13% below our estimate of intrinsic value.
Here are some of the most attractively priced stocks in the communications services sector are: America Movil (AMX), KDDI (KDDIY), and Sky (SKYAY).
Overvalued sectors have a ratio of above 1.00 which indicates that the stock's price is higher than the other estimates of the fair value. The further the price or fair value ratio rises above 1.00, the more that the median stock is overvalued.
While on the other hand, undervalued sectors have a ratio of below 1.00 which is the indication that the stock's price is lower than the estimated fair value. If this further moves below, 1.00, then the more the median stock will be undervalued.