Morningstar Catalog 2010/2011 - (Page 24)
Morningstar Equity Research Insightful investment ideas from independent analysts.
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Consistent, fundamental methodology for ratings with proven performance Morningstar® Economic Moat Rating gauges a company’s competitive advantages
monitor and are adding coverage in Asia. We also deliver objective opinions on all companies filing for IPOs in the United States. Our analysts evaluate every stock using a consistent research methodology that identifies a company’s sustainable competitive advantages, its risks, and whether the stock price accurately reflects both. The strong performance of our ratings speaks for itself: The Morningstar® Wide Moat Focus Index has returned more than 14% annualized since its inception in September 2002. This index tracks 20 stocks with a wide Economic Moat
Rating trading at the most significant discounts to our Fair Value Estimates. Institutional investors extend their internal research capabilities with Morningstar® Institutional Equity Research Services. They engage directly with our analysts via phone, e-mail, and in person to debate valuation assumptions, discuss competitive dynamics, and explore new ideas. For a broader view, they tap our analysts’ expansive industry knowledge to evaluate how companies stack up within their sectors and industries. Conferences and events also give clients the opportunity to interact in person with our analysts and managers of leading public companies.
Extensive industry research offers context for evaluating companies and sectors Covering nearly 2,000 companies in more than 90 industry groups, Morningstar is one of the largest independent sources for stock analysis in the world. We’ve recently doubled the number of European companies we
Economic Moat: The Four Sources of Sustainable Competitive Advantage
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C pany Proﬁtability Company Proﬁtabil y P ﬁt bilit lity
Through our robust web portal, institutional clients access in-depth company research reports, presentations, weekly sector updates and highlights, notes from company manager visits, and more. They can also download our analysts’ interactive and fully populated discounted cash flow models for every company we cover. Advisors find our research easy to read and share with clients. They support their investment decisions and client interactions with our company reports, picks, market perspectives, and market-beating model stock portfolios. Broker/dealers and asset management firms license our research to distribute to their affiliated advisors and investors. We also provide research to third-party websites, as well as through a variety of Morningstar products including Morningstar® Advisor Workstation (see p. 45) and Morningstar® Analyst Research Center (see p. 48).
Wide Moat Examples
Nike: Universally recognized brand with superior product development.
Oracle: Switching from Oracle’s tightly integrated databases could cause massive disruptions. Salesforce.com: A popular product, but switching costs are low for users.
CME Group: Its clearinghouse function keeps volume captive.
UPS: Ground delivery network has low marginal costs and high returns on capital. FedEx: The high fixed-cost air express segment is still a large proportion of revenue. Con-way: The trucking industry is very fragmented, making it tough to build scale and dig a moat.
Narrow Moat Examples
Adidas: Strong brand portfolio, but on a smaller scale and with less price leadership. lululemon athletica: Fad products that depend on the popularity of trends.
NYSE Euronext: Equity volume is interchangeable, and competitors have been stealing share. Knight Capital Group: Few network benefits from being an order-taker or market-maker.
No Moat Examples
TIBCO: High-end software ”plumber” seeing competition from all-in-one solutions.
Individual investors access our research reports, ratings, and analyst videos via Morningstar.com® (see p. 75).
Sign up for a free trial global.morningstar.com/EquityResearch
Morningstar Wide Moat Focus Index returns information is as of September 2010 and subject to change. Please visit global.morningstar.com/ActiveEquityIndexes for detailed index information including current returns.
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Morningstar Catalog 2010/2011
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