3 Undervalued Equities

THE VALUE INVESTOR: These UK companies are trading at less than their Fair Value Estimates. Could they be worth considering for the equity portion of your portfolio?

Emma Wall 22 October, 2014 | 4:33PM
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Identifying quality companies that are trading at less than their intrinsic value and snapping them up before they bounce can make you a pretty penny.

Morningstar equity analysts use qualitative research to determine a share’s Fair Value Estimate, and from this they award it a star rating. A stock with a five star rating is trading at significantly less than its Fair Value – and one that has been awarded one star is considered by analysts to have a share price much greater than the Fair Value estimate.

We screened for those stocks with a four or five star status indicating they are currently undervalued.

Kingfisher (KGF)

Kingfisher is Europe's largest home improvement retail group, and the third-largest globally behind Lowe's and Home Depot. With 1,134 stores in nine countries in Europe and Asia at the end of the first quarter of fiscal 2014, Kingfisher generates annual sales of around £11 billion. Its main retail brands are B&Q and Screwfix in the U.K., and Castorama and Brico Depot in France, and the firm also operates the Koctas brand, a 50% joint venture in Turkey with the Koc Group.

Morrisons (MRW)

Morrison is the fourth-largest grocery store operator in the U.K., with nearly 500 supermarkets and about 100 convenience stores. The firm began selling food online in early 2014. A vast majority of revenue comes from the sale of food products, although the firm also generates a meaningful portion, more than 20%, of its sales from fuel.

BG Group (BG.)

BG Group is an integrated energy company primarily engaged in the exploration for and production of natural gas in Egypt, the United Kingdom, Trinidad and Tobago, and Kazakhstan. It specializes in using liquefied natural gas to monetize its stranded gas resources for delivery to high-value markets in the United States, Europe, and Asia. In 2013, BG produced an average of 633,000 barrels of oil equivalent a day, 64% of which was natural gas, and has reported proven reserves of 3.4 billion barrels of oil.

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.

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About Author

Emma Wall  is former Senior International Editor for Morningstar