Morningstar has issued one of its most pointed calls of 2026 on the Australian stock market, arguing that beneath a headline index that looks expensive lies a far more nuanced picture and a meaningful pool of undervalued stocks for patient investors.
In a research note circulated late this week, the firm contrasted the market-weighted price-to-fair-value (P/FV) ratio of the ASX, which sits at 1.23x and signals an overvalued top end, with the equal-weighted ratio of 0.91x. The gap between those two numbers is the entire thesis: the largest stocks are pulling the index above fair value, while the median ASX-listed business is actually trading at a discount.
"The largest companies on the ASX are trading at a sizeable premium to our fair value," said Tyger Fitzpatrick, Morningstar's associate investment specialist who authored the analysis. "Significant value opportunities exist outside the largest names on the ASX."
The sector breakdown sharpens the message. Technology screens cheapest on an equal-weighted basis at a P/FV of 0.72x, followed by real estate at 0.74x and consumer cyclical at 0.82x. Each of those numbers implies stocks are trading at a meaningful discount to what Morningstar considers fair value, a striking finding at a time when global tech has driven most of the bull market narrative.
Three names anchor the firm's value list. Scentre Group, the operator of the Westfield-branded shopping centre portfolio, carries a four-star rating and a $4.00 fair value estimate, putting it at a 12 per cent discount. Analyst Yingqi Tan argued the centre owner has read the post-pandemic shift in retail correctly.
"Scentre has navigated the emerging e-commerce threat relatively well by increasing weighting in experience-based offerings," Tan said.
The most aggressive call sits with SiteMinder, the Sydney-listed hotel-tech business, where Morningstar carries a five-star rating and a fair value of $11.00, a 70 per cent discount to the firm's estimate. Analyst Roy Van Keulen flagged that artificial intelligence presents both an opportunity and a risk to the company's competitive position.
"Developments in AI could potentially lessen the scale advantages SiteMinder has over competitors," Van Keulen said, while still backing the stock as deeply undervalued at current prices.
The third pick is global packaging giant Amcor, also rated five stars, with a $90.00 fair value and a 36 per cent discount to fair value at recent prices. Together, the three picks span retail real estate, software-as-a-service and industrials, a deliberately diversified message rather than a single-sector bet.
The broader implication of Fitzpatrick's analysis is that index-level valuation calls obscure as much as they reveal. Investors looking only at the headline ASX 200 multiple may conclude the market is expensive and stay defensive. But Morningstar's equal-weighted view suggests there is plenty of room for active stock pickers, particularly in sectors that have been left behind by the AI- and resources-led rally.
For Australian investors weighing whether to deploy fresh capital, the firm's message is to look past the megacaps. With technology, real estate and consumer cyclical names all screening below intrinsic value on Morningstar's framework, the analysts believe the next leg of returns will come from rotation into the parts of the market the index trackers are quietly underweighting.