6 downgraded global stocks worth considering

A Morningstar stock downgrade doesn't necessarily mean you should run for the exit

Susan Dziubinski 14 January, 2019 | 6:00PM

No, the headline isn't a typo. Just because a company has been downgraded by Morningstar doesn't mean investors should sprint for the exits.

A downgrade in any one of Morningstar's measures - an economic moat rating, a fair value estimate, uncertainty - isn't a sell signal. Rather, a change indicates a recalibration of our long-term expectations. Companies that have experienced downgrades (or upgrades, for that matter) can still be undervalued or overvalued, depending on where the stock is trading relative to our fair value estimate. As a result, investors who read too much into downgrades may be missing out on opportunity.

Today we're looking for inexpensive, high-quality companies that have undergone a recent fair value downgrade. Specifically, we've screened for wide- and narrow-moat stocks with stable or positive moat trends trading in 4- or 5-star range whose fair value estimates have been cut by 10 per cent or more since 1 November, 2018.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Blackbaud Inc57.56 USD-3.02
General Electric Co6.11 USD-2.24
Johnson Controls International PLC40.35 USD-2.37
Tencent Holdings Ltd ADR65.50 USD-1.33
Trip.com Group Ltd ADR27.66 USD-1.07
Weibo Corp ADR Class A35.37 USD-1.70

About Author

Susan Dziubinski

Susan Dziubinski  Susan Dziubinski is director of content for Morningstar.com.

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