The number of undervalued companies in the technology sector increased from 26 to 48 in about a month’s time, Morningstar noted in a blog post this week. These stocks totaled nearly 20% of companies considered undervalued on Morningstar’s coverage list.
The Morningstar US Technology Index is down more than 10% from its all-time high on Dec. 27. As a result, the sector is now just 4% overvalued, compared with 18% at year-end.
Morningstar assesses a stock’s current valuation through the Morningstar Rating, based on analysts’ fair value estimates. Stocks rated with 4 or 5 stars are trading at a discount to their fair value and are considered undervalued.
To identify the most attractive, newly undervalued tech stocks, Morningstar screened for changes in their star rating between Jan. 21 and Feb. 7. It also added an economic moat filter to screen for companies with long-term competitive advantages.
See the gallery for 11 tech stocks that have become cheap, according to Morningstar.