Susan Dziubinski: Hi I’m Susan Dziubinski with Morningstar. U.S. stocks have posted frightening returns in 2022. After such gruesome performance, Morningstar estimates that U.S. stocks are about 18% undervalued.
But that doesn’t mean all stocks are screaming bargains—in fact, some still seem fiendishly overpriced to us. Today we’re looking at two overvalued stocks trading at scary prices.
The first spooky stock is Marathon Oil MRO. The independent exploration and production company has reshuffled its portfolio and is doubling down on U.S. shale. Like many shale companies, Marathon is prioritizing shareholder distributions rather than production growth. We don’t think the company has significant competitive advantages in the E&P space and, like most E&P firms, Marathon faces material ESG risk. We think the stock is expensive at today’s price and is worth just US$18 per share.
The second scary stock on our list is Dick’s Sporting Goods DKS. While Dick’s is the largest independent sporting goods chain in the U.S., we think the company lacks an edge as sporting goods are sold through many channels. Intense competition from e-commerce platforms like Amazon, mass-market retailers like Walmart, and specialty stores such as Nike has reduced Dick’s customer traffic and eroded its operating margins. The stock looks expensive to us: We think shares are worth US$78 each.
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Morningstar director Dave Meats and analyst David Swartz contributed the research behind this segment.
