Key Takeaways
- Nordic equities now trade close to fair value after a sharp re-rating in April.
- The war in Iran briefly triggered a risk-off move, before markets rebounded.
- Despite recent gains, select healthcare stocks still look undervalued.
After briefly falling into undervalued territory following the escalation of the war in Iran, the Morningstar Nordic Index has rebounded and now trades slightly above
The initial reaction to the conflict was characterized by rising geopolitical risk and a rotation into energy and certain defensive sectors. However, the subsequent recovery has broadened beyond the initial winners, with healthcare stocks emerging as the strongest contributors in recent weeks. This marks a notable reversal from earlier in the year, when healthcare was one of the main drags on index performance.
Technology and energy have also delivered strong gains since the escalation of the conflict, while industrials and financials have posted more moderate returns.
Undervalued Stocks Cluster in Healthcare and Defensives
Despite the recovery for the Nordic stock market, pockets of undervalued opportunities persist. While being the main contributor to the index performance in recent weeks, the healthcare sector stands out with several stocks trading below Morningstar analysts’ fair value estimates. Drug manufacturer Novo Nordisk NOVO B is trading in 4-star territory, offering a potential upside of 33%, while Coloplast COLO B, Genmab GMAB, Elekta EKTA B, and Demant DEMANT also feature on the list of undervalued Nordic healthcare stocks.
Beyond healthcare, select consumer and defensive names also screen as undervalued, including Pandora PNDORA, Essity ESSITY A and Carlsberg CARL B. A common feature across these stocks is weak recent performance, with several having recorded negative one-year returns, reflecting the earlier selloff in consumer and healthcare stocks.
The sharpest decline has been in jewelry maker Pandora, whose stock has moved in a near-perfect inverse of silver prices, down 60% since early 2025. As the largest affordable jeweler globally, Pandora has superior scale and financial muscle to navigate the silver price shock through a transition to plating, while retaining the opportunity to take advantage if silver prices fall again, Morningstar senior equity analyst Jelena Sokolova says.
“We think the market is mispricing a cyclical input cost shock as permanent structural impairment,” says Sokolova.
Overvalued Stocks Concentrated in Cyclicals
At the other end of the spectrum, overvalued stocks are dominated by cyclicals, particularly industrials, capital goods, and transport-related companies.
This group includes names such as Sandvik SAND, Wärtsilä WRT1V, Metso METSO, Alfa Laval ALFA, Volvo VOLV B, and A.P. Møller-Mærsk MAERSK B, many of which have delivered strong double-digit or even triple-digit returns over the past year. Telecom and communication equipment companies, including Telia TELIA, Tele2 TEL2 B, and Nokia NOKIA, also feature prominently.
In shipping, rerouting around the Red Sea due to the Iran war has temporarily tightened global capacity as roughly 30% of seaborne container trade normally passes through the Suez Canal. This has supported freight rates and earnings expectations across global shippers. However, longer-term valuation signals suggest this tailwind may already be fully reflected in share prices as is evident in A.P. Møller-Mærsk’s 2-star rating.
“We believe the market is overindexing toward the short term, leaving shares overvalued. Our long-term freight price forecast is unchanged by the Middle East conflict, as we anticipate increased supply from vessel deliveries to weigh on freight prices over the next half-decade,” says Ben Slupecki, equity analyst at Morningstar, on global shippers.
