4 Expensive UK Stocks Trading at a Premium

A buoyant market can leave some stocks trading at significantly more than their fair value estimate. We reveal the 4 companies currently overvalued

Emma Wall 12 January, 2018 | 10:18AM

Stock markets across the globe rose significantly last year – with emerging markets up 30% plus, the S&P 500 managing a return of 20% and even the FTSE 100 gaining 7.6%.

But a buoyant market can leave some stocks trading at significantly more than their fair value estimate. There are four UK stocks under Morningstar equity analysts’ coverage which are currently considered to be significantly overvalued. These stocks carry a one-star rating, meaning they are trading at a premium to their fair value.

Anglo American (AAL)

Global mining giant Anglo American's portfolio spans many commodities and continents. Like fellow large diversified miners, Anglo has significant exposure to copper, coal, and iron ore, but it is unique in its significant platinum output, which accounts for roughly 40% of the annual global supply. Anglo also owns 85% of De Beers, in most years the world's largest supplier and marketer of rough gem diamonds.

Direct Line Insurance (DLG)

Direct Line Insurance Group was incorporated in 1988 as the first personal lines insurer to serve the UK market through direct only, using the telephone. It is now one of the largest UK mainstream personal lines insurers selling motor, home, and rescue insurance. It also has a small commercial business unit serving small to medium-size enterprises.

Intertek Group (ITRK)

FTSE 100 firm Intertek is one of the largest and oldest companies in the testing, inspection, and certification industry. The company’s primary activities involve testing products and materials, inspecting sites/industrial equipment, and certifying products and systems to ensure global/company standards.

Intertek is one of only four TIC companies that operate globally across numerous industries. The firm listed in 2002, following a divestment by Charterhouse. It employs more than 41,000 people worldwide.

Rio Tinto (RIO)

Rio Tinto searches for and extracts a variety of minerals worldwide, with the heaviest concentrations in North America and Australia. Iron ore is the dominant commodity, with meaningful contributions from aluminium, copper, diamonds, energy products, gold, and industrial minerals.

The 1995 merger of RTZ and CRA, via a dual-listed structure, created the present-day company. The two operate as a single business entity. Shareholders in each company have equivalent economic and voting rights.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Anglo American PLC1,819.80 GBX-0.08
Direct Line Insurance Group PLC326.90 GBX0.21
Intertek Group PLC5,064.00 GBX-0.12
Rio Tinto PLC3,925.00 GBX0.00

About Author

Emma Wall

Emma Wall  is Senior Editor for Morningstar.co.uk