The Most Undervalued Sector of The Stock Market

Currently, I would say the most undervalued sector of the stock market is materials which includes iron ore, copper, gold, silver and other mining companies and companies producing various agriculture output like grains, wheat, soy beans etc.

Several months ago materials would have vied for the top spot as the most undervalued stock market sector with energy, but driven by the rising price of oil, the stock market prices of companies from the energy sector have risen a lot compared to the fundamentals. That said, I still see value in the stocks of energy companies. Regional war in Eastern Europe could disrupt Russian oil production and exports, which could make the price of oil rise by a high margin quickly.

The financials sector also is regarded as a value investing opportunity at present. As far as I am concerned, banks and financials' stocks do hold a lot of unrealised value which will be unlocked as the Federal Reserve, the central bank of the USA, embarks on a string of raises of the Federal Funds Rate which should cause the interest rate levels in the general economy of the USA and the world by momentum to rise.

The stocks of companies from the materials sector, however, did not enjoy so much a recent price run up as did the the financials and energy sector. So a lot of unlocked value remains in the materials sector.

Gold and gold miners are an interesting case. According to all textbooks higher inflation, the one present at most countries all over the world now, should cause the price of gold to rise. Several reasons have been given for why the price of gold has not risen with rising inflation. First, the United States Dollar appreciation towards other leading currencies like the EUR, JPY, GBP has caused gold's price to stagnate as gold's price is quoted in USD. Another factor is the rise of Bitcoin and other cryptocurrencies. Many analysts and investors think that the investment flows going into cryptocurrencies are in direct competition with prospective investments in gold.

All in all, stocks from the materials sector and gold miners, especially, seem undervalued. A lot. Here one should mind that slowing growth would influence negatively the stocks prices of iron ore and copper producers.