Weekly Wrap: Stock Picks of Top Managers, Dividend Funds, and Amazon.com
Where investors stand two weeks after Russia invaded Ukraine.
It’s been two weeks since Russia invaded Ukraine, and leaders and companies around the globe continued to respond this week. President Biden banned Russian oil imports to the United States. Major companies like Visa and Mastercard, Coke and Pepsi, and McDonald’s and Starbucks suspended their operations in Russia.
With the Russian stock and bond markets in shambles, index providers like MSCI and FTSE Russell dropped Russian stocks from their global benchmarks. “As I see it, the message is as strong as an index manufacturer can send from its perch, effectively: ‘You’re on your own now, and your stock market is worthless,’” noted Morningstar’s director of global ETF research Ben Johnson. Russia-focused exchange-traded funds in the U.S. have stopped accepting new money, and the many emerging-markets stock and bond funds with exposure to Russian stocks have struggled.
For investors, volatility has reigned. Morningstar’s markets columnist Sandy Ward filed an excellent piece this week outlining lessons for investors from post-invasion markets. You can find all of our coverage for investors related to the Russia/Ukraine conflict here.
This week, we published the second installment in our quarterly Ultimate Stock-Pickers series, focusing on buys and sells. (We published the installment about high-conviction purchases two weeks ago.) As a refresher, our roster of Ultimate Stock-Pickers includes 26 investment managers that our research teams deem elite; each quarter, we delve into the portfolios of these top-tier investors, looking for new investing ideas to pursue further.
One of the more attractively priced stocks among those purchases: 3M (MMM). The stock is about 24% undervalued today, though senior analyst Josh Aguilar admits that litigation risks will likely continue to muck up the company’s story for the foreseeable future. That being said, 3M may be a compelling idea for dividend-seekers, with its 4% forward dividend yield. “We think the dividend is safe, given 3M’s prioritization among its capital allocation priorities and a strong balance sheet,” adds Aguilar.
Speaking of dividend seekers: In my Our Picks column this week, I examine some of the highest-rated dividend-stock focused funds and ETFs. Although retirees typically adore dividend stocks for their income streams, many investors in the nonretired set enjoy “getting paid to wait”--or the idea of collecting quarterly income from stocks while holding on for stock price appreciation. And this year, many dividend investors are outpacing the market: Both the Morningstar Dividend Growth and the Morningstar Dividend Yield indexes are outperforming the Morningstar US Market Index for the year to date.
Part of the outperformance--at least for the Dividend Yield Index--owes to the stunning gains of rich-yielding energy stocks this year. In a recent episode of Dividend-Stock Deep Dive, Morningstar’s director of research for energy, Dave Meats, talked about the dividend prospects for the energy sector. And this week, Morningstar DividendInvestor editor David Harrell wrote a great primer on the variable dividend trend that seems to be sweeping the exploration and production industry specifically.
On Wednesday, Amazon.com (AMZN) announced plans for a 20-for-1 stock split. The firm is no stranger to stock splits, having split its stock a couple of times in the company’s history. Given that stock splits do not have any fundamental impact on a company’s prospects, Morningstar’s analysts generally shrug them off.
But stock split or no stock split, Morningstar thinks that this is a fundamentally strong company trading at a great price. We assign it a Morningstar Economic Moat Rating of wide with a stable moat trend and an exemplary capital allocation rating. “Amazon remains well positioned to prosper from the secular shift toward e-commerce and the public cloud over the next decade,” says senior analyst Dan Romanoff. The icing on the cake: Shares are trading about 32% below our $4,100 fair value estimate.
“Soon, women will play a bigger role in the world’s wealth,” notes Morningstar’s editorial director of sustainability Leslie Norton. “They’ll take control of more baby boomer assets, and, increasingly, they take the role of family breadwinners.”
In honor of International Women’s Day on March 8, Morningstar’s researchers examined women and investing from a variety of angles. We took a look at the corporate pay gap in the C-suite and how sexual misconduct became a business risk. We shone a spotlight on standout companies led by female CEOs and terrific female portfolio managers. And we uncovered why women invest less than men and how they can stave off a retirement shortfall. Find all of this content and more in our special report, How Women Are Breaking the Bias in 2022.
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There’s no need to panic, but checking in on these items can help keep your retirement on track.
18 Top Dividend-Stock Funds for 2022
These mutual funds and ETFs pursue various dividend strategies and earn Morningstar Analyst Ratings of Silver or Gold.
Required Minimum Distribution Confusion in 2022
Ed Slott shares what changes have arrived.
How Have Top Bond Managers Handled the Russia-Ukraine War?
Funds with large stakes in Russian and Ukrainian bonds face challenges.
5 Steps Women Can Take to Improve Their Retirement Readiness
The data are sobering about women's retirement preparedness, but being pre-emptive can help stave off a shortfall.
When the Stock Market Is Openly Inefficient
The curious case of Digital World Acquisition Corporation's warrants.
Big Financial Questions? Step Away From the Spreadsheet
Not all decisions are number-driven. The right answer might involve a bit of introspection.
How Can I Earn More on My Safe Money?
Liquidity and principal loss are things to keep in mind.
20 IRA Mistakes to Avoid
From contributions to conversions to distributions, don't fall into these traps.
Index Providers React to Russian Market Turmoil
Index providers and asset managers are writing off Russia.
The Best Female Portfolio Managers to Invest With Now
The fabulous 27 female managers.
2 Bond ETFs for a Rising Interest-Rate Environment
Now may be the time to tweak your fixed-income holdings.
3 Target-Date Funds for an IRA in 2022
Here's why target-date funds can be excellent choices for an IRA.
Is Investing in Emerging Markets Worth the Risk?
With hazards that are bigger and more numerous, these markets highlight the importance of diversification.
Just 8% of Emerging-Markets Funds Miss Russian Collapse
Some funds' processes led them away from Russian companies.
Why Are So Many Commodity Funds Underperforming?
Factors that have traditionally been a boost have hurt in 2022.
Starbucks' Stock Price Serves Up a Buying Opportunity
A shot of Starbucks shares could boost portfolios as rewards program drives growth.
Our Ultimate Stock-Pickers' Top 10 Buys and Sells
Funds see value in a diverse range of sectors.
Airline Stocks Encounter Some Turbulence
Demand headwinds may be ahead.
Is PayPal's Stock Overvalued?
Morningstar's analyst thinks the company could face headwinds in 2022, but investors may want to log on at the stock's current price.
Auto Stocks' Indirect Exposure to War Uncertain
Although we expect some negative impact on our fair value estimates, we remain focused on long-term value.
What to Expect From the 2022 Proxy Season
On the shareholder ballots this year: climate, lobbying transparency, gender and racial pay equity, diversity, and Carl Icahn's fight for animal rights.
Autocracy Is a Bad Investment
Russia, China highlight the need to consider "regime risk."
Andrew Miller: 'No Index Is Truly Passive'
The investment advisor discusses portfolio construction, the "active decisions of indexes," and the challenges of setting in-retirement withdrawal rates.
A Sign of a Good Fund Company: It Doesn't Terminate Its Funds
The virtues of organizations that stand and wait.
Should You Retire Your Mortgage?
Personal finance expert Clark Howard shares his insights into the housing market in 2022.
The Pros and Cons of Variable Dividends
Some companies are adopting variable dividend policies. Will the trend catch on?
Could Group Savings Work for My Family?
You don’t have to amass savings and assets alone.
A Flurry of New ETFs Have Launched in 2022
The latest offerings range from sensible to speculative.
Morningstar.com does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.