Morningstar imo is more like disaSTAR and imo BHP is certainly...

Morningstar imo is more like disaSTAR and imo BHP is certainly not fair value and more like undervalued

Materials

Jon Mills from Morningstar believes the basic materials sector is coming closer to fair value, primarily due to a disappointing stimulus in China.

But the sector’s up against some serious long-term hurdles as China moves away from a commodity-heavy economy as a result of its ageing population.

But there’s still hope, Mills said, thanks to supply issues in markets like high-grade titanium dioxide and zircon, which should eventually lead to higher demand for mineral sands.

As for gold, the sector remains steady after reaching historical highs, but Mills notes that the market is expensive, apart from Newmont Corporation (ASX:NEM), which is considered undervalued.

Mineral Resources (ASX:MIN), meanwhile, looks cheap in the long run due to high debt levels and subdued lithium prices, Mills said.

“And while BHP (ASX:BHP) and Rio Tinto (ASX:RIO) are fairly valued, Fortescue (ASX:FMG) remains materially overvalued.”