Esther Pak) The
market has been riding a downhill slope for the past three weeks, but
the sell-off really began to pick up steam late last week. Very little
has emerged from this downward spiral unscathed, and there's no telling
how much further stocks might fall before it's all over.
At the same time, the market inevitably overshoots on the downside,
so it's not too early to start making a shopping list of prospective
investments to add to on weakness. Morningstar's equity analysts think
that the stocks in their coverage universe are trading at a sizable
discount to fair value, and large caps appear to be particularly inexpensive, according to Morningstar's exchange-traded fund Fair Value Quickrank tool. For example, high-quality names like 3M (MMM) and Cisco Systems (CSCO) are highly undervalued according to our analysts.
Large- and mega-cap ETFs and index funds are one way to obtain
unadulterated exposure to beaten-down (and potentially cheap) blue
chips. Actively managed funds are another option. To help identify a
preliminary watchlist, we turned to the Premium Fund Screener
to home in on large-cap mutual funds that have recently been hard-hit
but are worth sticking by--or even adding to--in periods of market
We started with the domestic and foreign large value, blend, and growth categories. We then homed in on Fund Analyst Picks--offerings that
our in-house fund analyst team considers the best of the lot.
Additionally, we filtered for funds whose four-week returns ranked in
the bottom quartile of their categories. When we eliminated all but the
distinct portfolio of each fund, the screener yielded several funds,
three of which we've highlighted below. To replicate the screen, Premium
users can .
offering has suffered significant losses in the past month. While its
10- and 15-year trailing returns are at the top of its large-growth
class, its negative 11.7% one-month drop lands it in the bottom quartile
of its peer group during that period.