4 New 4-Star Stocks

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

For the week ended Jan. 17, four stocks saw their Morningstar Ratings change to 4 stars, while another one dropped into 5-star territory. Stocks rated 3 stars are fairly valued according to Morningstar analysts, while those rated 1 or 2 stars are considered overvalued.

The four new 4-star stocks, ordered by market cap, are:

• Taiwan Semiconductor Manufacturing TSM
• Deere DE
• Exact Sciences EXAS
• GDS Services GDS

The new 5-star stock is:

• Charles River Laboratories International CRL

All returns in this article are reported in the stock’s base currency and all data is sourced from Morningstar Direct.

Newly Undervalued Stocks for the Week Ended Jan. 17

The Morningstar US Market Index rose 3.11% 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 860 US-listed stocks covered by Morningstar analysts:

• 37% are undervalued, 38% are fairly valued, and 25% are overvalued.
• Four are newly undervalued.
• 29 are newly overvalued.
• One moved from a 4-star rating to a 5-star rating.
• Three moved from a 5-star rating to a 4-star rating.
• None of the newly undervalued stocks jumped from a 3-star rating to a 5-star rating.
• 12 are no longer undervalued.

Morningstar analysts assign every stock under their coverage a fair value estimate, which is an intrinsic measure of the stock’s 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

Taiwan Semiconductor Manufacturing

• Morningstar Rating: ★★★★
• One-Week Return: 1.50%

Taiwan Semiconductor has climbed 3.08% over the past three months and 108.32% over the past year. The stock’s fair value estimate rose to $273 per share from $215 during the week. It ended the week trading at a 23% discount to its new fair value estimate, with an Uncertainty Rating of Medium. Taiwan Semiconductor is a large-growth company with a wide economic moat.

Deere

• Morningstar Rating: ★★★★
• One-Week Return: 11.47%

Heavy machinery company Deere is up 12.85% over the past three months and 22.09% over the past year. The stock’s fair value estimate rose to $501 per share from $355 during the week. It ended the week trading at a 9% discount to its new fair value estimate, with an Uncertainty Rating of Medium. The large-value stock has a wide economic moat.

Exact Sciences

• Morningstar Rating: ★★★★
• One-Week Return: -8.42%

Diagnostics and research firm Exact Sciences has lost 25.26% over the past three months and 19.24% over the past year. The small-growth stock has no economic moat. Exact Sciences is trading at a 24% discount to its fair value estimate of $68 per share, with an Uncertainty Rating of Very High.

GDS Services

• Morningstar Rating: ★★★★
• One-Week Return: -12.07%

Information technology services company GDS is up 11.15% over the past three months and 276.92% over the past year. The stock’s price is 19% below its fair value estimate of $29 per share, with an Uncertainty Rating of Very High. The large-core stock has no economic moat.

Metrics for this Week’s New 5-Star Stock

Charles River Laboratories International

• Morningstar Rating: ★★★★★
• One-Week Return: -12.15%

Diagnostics and research firm Charles River has dropped 17.33% over the past three months and 19.66% over the past year. The stock trades at a 37% discount to its fair value estimate of $260 per share, with an Uncertainty Rating of Medium. Charles River is a small-core company with a narrow economic moat.