Morningstar - Q3 2021 - 25

Dispatches
off for many investors in 2020, as thematic
funds climbed to new heights, but some of the
same individuals will likely get burned when
the fortunes of the more popular themes inevitably
wane and investors swarm for the exits.
Ben Johnson, CFA, is director of global exchange-traded
fund research at Morningstar Research Services LLC. He is
a member of the editorial board of Morningstar magazine.
TRENDS
Surge in SPACs Not a Flash in the Pan
Shell Loses Its Moat
GREATER EUROPE
United Kingdom
Oil giant Shell RDSB:GB has been stripped of
its narrow moat rating in a decision that highlights
Morningstar analysts' lower expectations
for oil prices over the next decade and the overall
uncertainty about renewable energy.
Analyst Allen Good explains the thinking behind
the downgrade in a recent analyst note:
" Our forecast for excess returns has become too
low while the company's future uncertainty
is too high to award a moat. "
The FTSE 100 company now is rated as having
no economic moat, which negatively affects
Morningstar's valuation, but that is partially offset
by higher oil prices. The overall result: Morningstar
has lowered its fair value estimate for Shell
to GBX 1,940 per share from GBX 2,250. The stock
is still undervalued, trading at GBX 1,357.40
as of June 18, but its Morningstar Rating has
dropped from 5 stars to 4 stars.
" Shares still appear cheap at a discount of nearly
25%, " says Good. " However, given a lower
yield and less oil exposure, Shell might lag in
an oil price rally. "
Good acknowledges that the downgrade might
appear to be a quick reversal, given that
Shell was upgraded to a narrow moat rating
just a few years ago, but circumstances
have changed. At that time, integrated oils,
The initial flurry of special-purpose acquisition
companies in 2020 seemed like a flash in the
pan at first, but it looks like these vehicles
are here to stay. The unprecedented uptick in
SPAC IPO volume in 2020 and the first quarter
of 2021 has created a dedicated pool of
more than $200 billion to invest in privately
owned companies-and that figure does not
even include the private investments in
public equity that accompany many of these
acquisitions. While we saw a few indicators of
waning enthusiasm for SPACs near the end
of 2020 with a handful of downsized SPAC IPOs,
this development looks to be just a blip.
U.S. Equity Funds
114.14
14.67
Sector Funds
<0.11%
Prospectus Net Expense Ratio
0.11-0.20 0.21-0.30 0.31-0.40 0.41-0.50 0.51-0.60 0.61-0.70 0.71-0.80 0.81
SPAC IPOs exploded in 2021, with aggregate
capital raised already surpassing the total
in 2020 by 19.8% in just over one quarter. Recent
SEC scrutiny regarding SPACs has led to
uncertainty around any potential accounting
treatment of warrants, which seems to
have caused a temporary halt on new IPOs;
however, as it stands now, we believe
SPACs still fill a gap in the market, will adapt
to any changes, and remain a primary
option for companies looking to go public.
Cameron Stanfill, CFA, is a senior venture capital analyst
at PitchBook.
14.41
Global SPAC IPO Activity
Capital Raised via SPAC IPO
$120B
100
80
60
40
20
0.5
*Data as of 04/15/2021.
Source: PitchBook.
0.2
0.4
1.3
2.1
1.6
6.1
11.5
16.8
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021*
92.9
SPAC IPO Count
400
111.5
329
300
200
100
including Shell, had made significant headway
in reducing operating costs in their existing
production base and capital intensity of
new projects. Given oil price assumptions at
the time, Morningstar analysts forecast
that Shell could earn adequate excess returns.
" While Shell has managed to maintain
improvements, the uncertainty of excess returns
10 years from now has increased due to
the changing composition of the business and
potential level of commodity prices, " Good
explains. " In short, we have neither the confidence
that Shell's plan to transition to a more
renewable and low-carbon business will create
competitive advantages nor that commodity
prices will consistently be at levels sufficient to
generate excess returns during the next 10 years. "
morningstar.com/lp/magazine
25
https://www.morningstar.com/articles/1027487/what-are-spacs-and-should-i-care https://www.morningstar.com/authors/680/ben-johnson https://pitchbook.com/ https://tools.morningstar.co.uk/uk/stockreport/default.aspx?Site=uk&id=0P0000BT0X&LanguageId=en-GB&SecurityToken=0P0000BT0X%5d3%5d0%5dE0WWE$$ALL https://www.morningstar.com/articles/735365/the-morningstar-economic-moat-rating https://www.morningstar.com/authors/816/allen-good https://www.morningstar.com/articles/1044343/why-shell-no-longer-has-a-moat https://www.morningstar.com/articles/1044343/why-shell-no-longer-has-a-moat https://www.morningstar.com/articles/735356/the-morningstar-rating-for-stocks http://www.morningstar.com/lp/magazine

Morningstar - Q3 2021

Table of Contents for the Digital Edition of Morningstar - Q3 2021

Contents
Morningstar - Q3 2021 - Cover1
Morningstar - Q3 2021 - Cover2
Morningstar - Q3 2021 - 1
Morningstar - Q3 2021 - 2
Morningstar - Q3 2021 - Contents
Morningstar - Q3 2021 - 4
Morningstar - Q3 2021 - 5
Morningstar - Q3 2021 - 6
Morningstar - Q3 2021 - 7
Morningstar - Q3 2021 - 8
Morningstar - Q3 2021 - 9
Morningstar - Q3 2021 - 10
Morningstar - Q3 2021 - 11
Morningstar - Q3 2021 - 12
Morningstar - Q3 2021 - 13
Morningstar - Q3 2021 - 14
Morningstar - Q3 2021 - 15
Morningstar - Q3 2021 - 16
Morningstar - Q3 2021 - 17
Morningstar - Q3 2021 - 18
Morningstar - Q3 2021 - 19
Morningstar - Q3 2021 - 20
Morningstar - Q3 2021 - 21
Morningstar - Q3 2021 - 22
Morningstar - Q3 2021 - 23
Morningstar - Q3 2021 - 24
Morningstar - Q3 2021 - 25
Morningstar - Q3 2021 - 26
Morningstar - Q3 2021 - 27
Morningstar - Q3 2021 - 28
Morningstar - Q3 2021 - 29
Morningstar - Q3 2021 - 30
Morningstar - Q3 2021 - 31
Morningstar - Q3 2021 - 32
Morningstar - Q3 2021 - 33
Morningstar - Q3 2021 - 34
Morningstar - Q3 2021 - 35
Morningstar - Q3 2021 - 36
Morningstar - Q3 2021 - 37
Morningstar - Q3 2021 - 38
Morningstar - Q3 2021 - 39
Morningstar - Q3 2021 - 40
Morningstar - Q3 2021 - 41
Morningstar - Q3 2021 - 42
Morningstar - Q3 2021 - 43
Morningstar - Q3 2021 - 44
Morningstar - Q3 2021 - 45
Morningstar - Q3 2021 - 46
Morningstar - Q3 2021 - 47
Morningstar - Q3 2021 - 48
Morningstar - Q3 2021 - 49
Morningstar - Q3 2021 - 50
Morningstar - Q3 2021 - 51
Morningstar - Q3 2021 - 52
Morningstar - Q3 2021 - 53
Morningstar - Q3 2021 - 54
Morningstar - Q3 2021 - 55
Morningstar - Q3 2021 - 56
Morningstar - Q3 2021 - 57
Morningstar - Q3 2021 - 58
Morningstar - Q3 2021 - 59
Morningstar - Q3 2021 - 60
Morningstar - Q3 2021 - 61
Morningstar - Q3 2021 - 62
Morningstar - Q3 2021 - 63
Morningstar - Q3 2021 - 64
Morningstar - Q3 2021 - 65
Morningstar - Q3 2021 - 66
Morningstar - Q3 2021 - 67
Morningstar - Q3 2021 - 68
Morningstar - Q3 2021 - 69
Morningstar - Q3 2021 - 70
Morningstar - Q3 2021 - 71
Morningstar - Q3 2021 - 72
Morningstar - Q3 2021 - 73
Morningstar - Q3 2021 - 74
Morningstar - Q3 2021 - 75
Morningstar - Q3 2021 - 76
Morningstar - Q3 2021 - 77
Morningstar - Q3 2021 - 78
Morningstar - Q3 2021 - 79
Morningstar - Q3 2021 - 80
Morningstar - Q3 2021 - 81
Morningstar - Q3 2021 - 82
Morningstar - Q3 2021 - 83
Morningstar - Q3 2021 - 84
Morningstar - Q3 2021 - 85
Morningstar - Q3 2021 - 86
Morningstar - Q3 2021 - 87
Morningstar - Q3 2021 - 88
Morningstar - Q3 2021 - 89
Morningstar - Q3 2021 - 90
Morningstar - Q3 2021 - 91
Morningstar - Q3 2021 - 92
Morningstar - Q3 2021 - 93
Morningstar - Q3 2021 - 94
Morningstar - Q3 2021 - 95
Morningstar - Q3 2021 - 96
Morningstar - Q3 2021 - Cover3
Morningstar - Q3 2021 - Cover4
Morningstar - Q3 2021 - M1
Morningstar - Q3 2021 - M2
Morningstar - Q3 2021 - M3
Morningstar - Q3 2021 - M4
Morningstar - Q3 2021 - M5
Morningstar - Q3 2021 - M6
Morningstar - Q3 2021 - M7
Morningstar - Q3 2021 - M8
Morningstar - Q3 2021 - M9
Morningstar - Q3 2021 - M10
Morningstar - Q3 2021 - M11
Morningstar - Q3 2021 - M12
Morningstar - Q3 2021 - M13
Morningstar - Q3 2021 - M14
Morningstar - Q3 2021 - M15
Morningstar - Q3 2021 - M16
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2021q3
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2021q2
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2021q1
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2020q4
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2020q3
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2020q2
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2020q1
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2019winter
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2019fall
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2019summer
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2019spring
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20191201
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20181011
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20180809
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20180607
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20180405
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20180203
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20181201
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20171011
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20170809
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20170607
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20170405
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20170203
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20171201
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20161011
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20160809
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20160607
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20160405
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20160203
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20161201
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20151011
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20150809
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20150607
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20150405
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20150203
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20151201
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20141011
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20140809
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20140607
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20140405
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20140203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20141201
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20131011
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20130809
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20130607
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20130405
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20130203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20131201
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20121011
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20120809
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20120607
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20120405
https://www.nxtbook.com/nxtbooks/morningstar/investorconference2012
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20120203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20121201
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20111011
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20110809
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20110607
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20110405
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20110203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20111201
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20101011
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100809_lincoln
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100809
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100607_lincoln
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100607
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100405_lincoln
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100405
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20101201
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20091011
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20090809
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20090607
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20090405
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20090203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2008fall
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2008summer
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2007spring
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2007fall
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2007summer
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2008spring
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2008catalog
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2008winter
https://www.nxtbookmedia.com