Morningstar says buy these 10 top-rated stocks while they're still cheap

Despite the S&P 500’s scorching 39% rally since April, there are still pockets of the market that investors are undervaluing, Morningstar says.

On Wednesday, the firm released a list of 33 cheap stocks compiled by its analysts that it says investors should buy.

“Undervalued stocks are those that trade below what they’re worth,” Susan Dziubinski, an investment specialist for Morningstar, wrote in the report. “At Morningstar, we define undervalued stocks as those that are trading below our calculated fair value estimate, adjusted for what we call uncertainty—both of which are wrapped into the Morningstar Rating for stocks.”

Below, we’ve pulled the 10 stocks off the list that both trade in the US and have a five-star rating from Morningstar. A 2018 analysis showed its five-star stocks crushed those it rated lower.

The firm said a five-star rating means that: “We believe appreciation beyond a fair risk-adjusted return is highly likely over a multiyear time frame. Our analysis indicates that the current market price represents an excessively pessimistic outlook, which limits downside risk and maximizes upside potential.”

Morningstar’s price-to-fair value ratio for each stock is also included. A score of one indicates a stock trades at fair value — the further a score drops below one, the cheaper it is by Morningstar’s standards.

Here are 10 cheap stocks investors should consider, according to the firm’s analysts.