Stock Insight

Three stocks to avoid

These stocks are all in the red this year yet continue to trade above our estimates of their fair value.

Susan Dziubinski 28 December, 2017 | 6:00PM

In an article two weeks ago I put the spotlight on stocks that have returned twice as much as the S&P 500 this year, yet still looked undervalued according to Morningstar's estimates of their fair values. These stocks have more room to run, in our opinion.

This week, we're taking a look at stocks through the opposite lens, focusing on those that have underperformed the market in 2017, yet still look overpriced according to Morningstar's estimates of their fair values. In our opinion, these would be stocks to avoid.

Specifically, I screened for stocks that have lost money this year and that are trading in 1- or 2-star range, which suggests they're overvalued. I then narrowed the search further to companies with wide or narrow economic moat ratings. Here is a detailed look at three of the names that made the list.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Cisco Systems Inc45.98 USD0.04
Citrix Systems Inc140.87 USD1.19
Conagra Brands Inc33.83 USD0.28
Core Laboratories NV20.10 USD-1.93
F5 Networks Inc144.26 USD-0.70
Radware Ltd23.75 USD-0.34

About Author

Susan Dziubinski

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

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The Morningstar Star Rating for Stocks is assigned based on an analyst's estimate of a stocks fair value. It is projection/opinion and not a statement of fact. Morningstar assigns star ratings based on an analyst’s estimate of a stock's fair value. Four components drive the Star Rating: (1) our assessment of the firm’s economic moat, (2) our estimate of the stock’s fair value, (3) our uncertainty around that fair value estimate and (4) the current market price. This process culminates in a single-point star rating that is updated daily. A 5-star represents a belief that the stock is a good value at its current price; a 1-star stock isn't. If our base-case assumptions are true the market price will converge on our fair value estimate over time, generally within three years. Investments in securities are subject to market and other risks. Past performance of a security may or may not be sustained in future and is no indication of future performance. For detail information about the Morningstar Star Rating for Stocks, please visit here

Quantitative Fair Value Estimate represents Morningstar’s estimate of the per share dollar amount that a company’s equity is worth today. The Quantitative Fair Value Estimate is based on a statistical model derived from the Fair Value Estimate Morningstar’s equity analysts assign to companies which includes a financial forecast of the company. The Quantitative Fair Value Estimate is calculated daily. It is a projection/opinion and not a statement of fact. Investments in securities are subject to market and other risks. Past performance of a security may or may not be sustained in future and is no indication of future performance. For detail information about the Quantiative Fair Value Estimate, please visit here