Morningstar Advisor - Summer 2007 - 41

as I’ve spent time talking to some people in those companies and in the media companies that are being disintermediated by them, a Yahoo is starting to look like a media company. Rupert Murdoch commented the other day that the one competitor that is going to cause him the most trouble in five or 10 years is Google. JR: I keep thinking that Google and Yahoo will buy some of these newspaper companies. WW: You hope. JR: Newspaper companies are so tiny, marketcap wise, relative to these giant Internet companies, that they could buy a newspaper for a rounding error, gather all the content, all those local salespeople and local expertise, and help make those companies more relevant for the next generation. I think one thing Sam Zell has said very well, since he bought the Tribune, is that relevant content still matters. There are still opportunities to make papers more interesting to local readers and create partnerships with Internet companies to marry their content with that expertise. WW: It will be interesting to see what Murdoch does with The Wall Street Journal, if he gets it. JR: I wish we owned it. We don’t. What we’re working on is that we think more corporations believe in outsourcing—that people realize they can’t be experts at everything. It’s like what Buffett and Munger always talk about for investors: Stay within your circle of competence. We’ve been trying to find companies that can benefit from that trend. We’ve had successful holdings in companies like Accenture ACN, which does technology outsourcing, Jones Lang LaSalle JLL, which does real estate outsourcing, and Hewitt HEW, which does human resources consulting. We both believe in staying relatively concentrated and sticking with industries we know best and understand. How do you deal with the criticism from people who say you I wonder, will there be a large enough universe of small-cap stocks to find high-quality small companies? So many of the great industries have just been consolidated away. —John Rogers have to live with. We’ve had fluctuations, you’ve had fluctuations. It’s disconcerting for the brand-new shareholder in the firm to have his stocks go down. But that’s how it goes. JR: You talked about the areas that worked for you a few years ago, such as cable. What are your next areas of success? Where do you think the alpha’s going to come from? WW: The thing we always keep coming back to is financial stocks. Periodically, the Fed raises rates, and people automatically think they ought to sell their financials, which almost always is the wrong idea. The earnings keep going up, the multiples drop in half, they come back, we make a lot of money. But also there’s periods of credit trouble, and there hasn’t been one of those for a while. There was a liquidity crisis in ‘98; there were some scares about credit in ‘02. Now, we’re getting the subprime mortgage blowups. It seems like an awful lot of investors feel like they ought to have some financials, because they have to have some of everything—you know, the Noah’s ark of diversification. But their hearts are not really in it, and they don’t really have conviction about the company’s ability to measure credit risk or to deal with interestrate risk. So periodically, the stocks get out of favor without the businesses being hurt. And that’s heaven for us. Also, I’m finally beginning to believe that it’s possible to understand a Yahoo YHOO or a Google GOOG. I don’t pretend that I do yet, but MorningstarAdvisor.com 41
http://www.MorningstarAdvisor.com

Morningstar Advisor - Summer 2007

Table of Contents for the Digital Edition of Morningstar Advisor - Summer 2007

Morningstar Advisor - Summer 2007
Contents
Letter from the Publisher
Get to Know the Bond “All-Stars”
Research Briefs
Our Stewardship Test Gets Tougher
Save It for Later
Too Many Oranges
Best of Both Worlds
No Two Clients Are Alike
When It Comes to VAs, It’s Seller Beware
Hands On: Finding the Suitable Fund Share Class for Your Client
Fund Style Can Drift Off Course
Sticking to Their Style, Through Thick and Thin
Marathon Man
Growth, With a Chaser
A Menu of Ideas to Fill Five Market Baskets
Funds: Finding Funds with Conviction
Stocks: So You Say You Want Income?
All Eyes on China
Mutual Fund Analyst Picks
Undervalued Stocks
Most Popular Variable Annuities
What’s New at Morningstar and on the Web
The Advisor’s Economic Moat
Morningstar Advisor - Summer 2007 - Intro
Morningstar Advisor - Summer 2007 - Morningstar Advisor - Summer 2007
Morningstar Advisor - Summer 2007 - Cover2
Morningstar Advisor - Summer 2007 - Contents
Morningstar Advisor - Summer 2007 - 2
Morningstar Advisor - Summer 2007 - 3
Morningstar Advisor - Summer 2007 - 4
Morningstar Advisor - Summer 2007 - Letter from the Publisher
Morningstar Advisor - Summer 2007 - 6
Morningstar Advisor - Summer 2007 - 7
Morningstar Advisor - Summer 2007 - Get to Know the Bond “All-Stars”
Morningstar Advisor - Summer 2007 - 9
Morningstar Advisor - Summer 2007 - Research Briefs
Morningstar Advisor - Summer 2007 - 11
Morningstar Advisor - Summer 2007 - Our Stewardship Test Gets Tougher
Morningstar Advisor - Summer 2007 - 13
Morningstar Advisor - Summer 2007 - Save It for Later
Morningstar Advisor - Summer 2007 - 15
Morningstar Advisor - Summer 2007 - Too Many Oranges
Morningstar Advisor - Summer 2007 - 17
Morningstar Advisor - Summer 2007 - Best of Both Worlds
Morningstar Advisor - Summer 2007 - 19
Morningstar Advisor - Summer 2007 - 20
Morningstar Advisor - Summer 2007 - No Two Clients Are Alike
Morningstar Advisor - Summer 2007 - When It Comes to VAs, It’s Seller Beware
Morningstar Advisor - Summer 2007 - 23
Morningstar Advisor - Summer 2007 - 24
Morningstar Advisor - Summer 2007 - 25
Morningstar Advisor - Summer 2007 - 26
Morningstar Advisor - Summer 2007 - 27
Morningstar Advisor - Summer 2007 - 28
Morningstar Advisor - Summer 2007 - Hands On: Finding the Suitable Fund Share Class for Your Client
Morningstar Advisor - Summer 2007 - 30
Morningstar Advisor - Summer 2007 - 31
Morningstar Advisor - Summer 2007 - 32
Morningstar Advisor - Summer 2007 - 33
Morningstar Advisor - Summer 2007 - Fund Style Can Drift Off Course
Morningstar Advisor - Summer 2007 - 35
Morningstar Advisor - Summer 2007 - 36
Morningstar Advisor - Summer 2007 - Sticking to Their Style, Through Thick and Thin
Morningstar Advisor - Summer 2007 - 38
Morningstar Advisor - Summer 2007 - 39
Morningstar Advisor - Summer 2007 - 40
Morningstar Advisor - Summer 2007 - 41
Morningstar Advisor - Summer 2007 - 42
Morningstar Advisor - Summer 2007 - Marathon Man
Morningstar Advisor - Summer 2007 - 44
Morningstar Advisor - Summer 2007 - 45
Morningstar Advisor - Summer 2007 - 46
Morningstar Advisor - Summer 2007 - 47
Morningstar Advisor - Summer 2007 - Growth, With a Chaser
Morningstar Advisor - Summer 2007 - 49
Morningstar Advisor - Summer 2007 - 50
Morningstar Advisor - Summer 2007 - 51
Morningstar Advisor - Summer 2007 - A Menu of Ideas to Fill Five Market Baskets
Morningstar Advisor - Summer 2007 - 53
Morningstar Advisor - Summer 2007 - 54
Morningstar Advisor - Summer 2007 - 55
Morningstar Advisor - Summer 2007 - 56
Morningstar Advisor - Summer 2007 - 57
Morningstar Advisor - Summer 2007 - Funds: Finding Funds with Conviction
Morningstar Advisor - Summer 2007 - 59
Morningstar Advisor - Summer 2007 - Stocks: So You Say You Want Income?
Morningstar Advisor - Summer 2007 - 61
Morningstar Advisor - Summer 2007 - 62
Morningstar Advisor - Summer 2007 - All Eyes on China
Morningstar Advisor - Summer 2007 - 64
Morningstar Advisor - Summer 2007 - 65
Morningstar Advisor - Summer 2007 - 66
Morningstar Advisor - Summer 2007 - 67
Morningstar Advisor - Summer 2007 - Mutual Fund Analyst Picks
Morningstar Advisor - Summer 2007 - 69
Morningstar Advisor - Summer 2007 - 70
Morningstar Advisor - Summer 2007 - 71
Morningstar Advisor - Summer 2007 - Undervalued Stocks
Morningstar Advisor - Summer 2007 - 73
Morningstar Advisor - Summer 2007 - Most Popular Variable Annuities
Morningstar Advisor - Summer 2007 - 75
Morningstar Advisor - Summer 2007 - What’s New at Morningstar and on the Web
Morningstar Advisor - Summer 2007 - 77
Morningstar Advisor - Summer 2007 - 78
Morningstar Advisor - Summer 2007 - 79
Morningstar Advisor - Summer 2007 - The Advisor’s Economic Moat
Morningstar Advisor - Summer 2007 - Cover3
Morningstar Advisor - Summer 2007 - Cover4
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