These are the only 9 stocks Morningstar rates 5-stars

The U.S. stock market is so expensive that only a handful of stocks quality as “five-star” names, according to Kunal Kapoor, the chief executive officer of Morningstar Inc., who nonetheless stressed that investors shouldn’t panic.

In a speech Wednesday at his company’s annual investment conference, Kapoor pointed to a Morningstar calculation of fair value for the U.S. market. Last year, it was at 0.86, meaning the market was 14% undervalued. “Generally speaking it was a good environment to invest in, even if it felt uncertain,” he said.

Now, the metric is at 1.04, indicating it is 4% overvalued; last week, it was 2% overvalued. “There are just nine stocks that would rate as five stars in our coverage universe,” he said

They are:

Bed, Bath & Beyond, Hanesbrands Inc, Calpine Corp, McKesson Corp., Endo International, Roche Holding AG, Ten Network Holdings Ltd, Vocus Group and Beijing Enterprises Holdings Ltd.

Kapoor didn’t give specific investment strategies, except to encourage investors to not panic and maintain their long-term strategies.

“There were two kinds of advisors in the bear market of the financial crisis, he said. “The first type broke their rules. They panicked, broke from their asset allocations."

“The second group also had it rough. But they stuck to their plan and did the right thing. They rebalanced, moved more assets into declining parts of the market, and ended up with really good results.”

Source: Bloomberg

Junior Trader Stefan Panteleev

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