undervalued, cheap, (and going down?)

I'm looking through some old mail in my deleted folder and came across this Morningstar article dated 10/8/08 titled The Market's Most Undervalued Stocks (These five high-quality companies are truly cheap).

These were stocks with Morningstar ratings of 5 stars and trading at less than half of their fair value estimate.

The stocks named were USG, UNH, COP, NWS, EXPE.

Let's see how they have done.

      10/8/08  3/6/08  loss%
USG    19.85    4.29    78%
UNH    19.20   17.90     7%
COP    60.77   35.36    42%
NWS    10.06    6.00    40%
EXPE   12.96    6.47    50%

The Vanguard 500 (I chose this instead of the S&P 500 because Yahoo has an adjusted close which accounts for dividends) has gone from 89.96 to 63.96 or a loss of 29%. So four out of the five stocks have underperformed the index.

Which tells me just because it's good and cheap doesn't mean it won't go down a lot. (Now let's see how they do on the upside -- if we ever get an upside one of these days.)

* * *

Yet Morningstar maintains that (Graham-style) value investing protects the downside. (Does that mean Morningstar doesn't practice value investing?)