The research house puts out a report each month highlighting large cap Australian and New Zealand companies it says are trading at significant discounts to assessed fair values.
For February, it had nine companies in the list. Three of the big four Kiwi banks feature prominently.
Westpac and Mayne Pharma Group were added to the list.
Morningstar said Commonwealth Bank of Australia, which operates ASB in New Zealand, still offered good value and was its preferred Australian major bank.
"The bank has historically been the most expensive of the major banks, but the recent sell-off places it at an attractive discount to our AUD 91 fair value estimate. Commonwealth Bank is the least risky of the four major banks. It is conservatively managed, Australia- and New Zealand-focused, and benefits from large market shares, a comparatively lower-risk loan book, and a sustainable and attractive fully franked fiscal 2016 dividend yield."
Westpac was also rated well by Morningstar's analysts. "Despite widespread concerns of deteriorating lending standards in Australia, Westpac continues to provide strong evidence to the contrary.
"There are no signs of impending disaster with consumer credit quality remaining sound. the bank is currently undervalued, trading 24% below our AUD 38 per share valuation."
The Morningstar report said the major banks generally offered good value, despite signs investors were pulling back from them.
Small investors only took half the shares offered by CBA in September in an expected A$3 billion rights entitlement offer, despite a discounted rate.
"Negative investor sentiment on Australian major banks is overdone and not based on hard facts. In our opinion, Westpac's valuation gap starts to close as investor confidence returns, global markets stabilise, Australia continues to generate relatively solid GDP growth, and unemployment remains near current levels."
But ANZ was dropped from the top picks list this month.
"Despite our positive long-term view on the outlook for ANZ Bank, we acknowledge short-term risks continue to mount and closing of the gap between the share price and our valuation will likely take longer than we had previously expected. Despite a solid trading update for first-quarter fiscal 2016, we were disappointed in guidance for higher first-half bad debts mostly related to ANZ Bank's Asian businesses," Morningstar said.
"Highlights were good performances from the retail and small business banking segments in Australia and New Zealand."
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