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Investing Specialists

Morningstar Runs the Numbers

We take a numerical look through this week's Morningstar research. Plus, our most popular articles and videos for the week ended Feb. 10.

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Inspired by Harper's Index (with a tip of the hat to FiveThirtyEight's Significant Digits blog), Morningstar Runs the Numbers uses a numbers-based approach to highlight recent Morningstar research, along with some outside news stories.

Janet Yang, our director of manager research for multiasset strategies, pointed out six funds that benefit from decadeslong manager continuity, but are now facing succession questions

"Some of these managers are well past standard retirement age (most have no plans to retire in the near future). In some cases, firms have been prepping for the inevitable by building out deep benches. In others, though, the next leader has yet to emerge."

Uncertainties surrounding pharmaceutical companies have weighed on many healthcare stocks. Equity analyst Vishnu Lekraj thinks many of these headwinds are undue, and are providing investors with an opportunity to buy quality healthcare stocks at cheap prices.

"Currently, we believe two stocks in particular, Express Scripts and McKesson, present great opportunities to buy high-quality firms at cheap prices. Both stocks we have rated as wide moat. We believe both of these stocks are undervalued, and they're both positioned very well to produce economic profitability over a significant period."

40 Years
Since the 1970s, 30 years has marked the outer boundary of Treasury bond issuance. But that wasn't always the case: From 1957 to 1965, the Treasury Department was interested in lengthening the maturity structure of the debt and once issued a 40-year bond, as explained in this New York Fed blog post

"[In January 1955], Treasury officials announced the offering of a 13-month note and a 40-year bond in a par-for-par exchange for a 2⅞ percent bond called for early redemption on March 15... Of the $2.6 billion of the 2⅞ percent bonds outstanding, $323 million was exchanged into the 13-month note, $1.9 billion was exchanged into the 40-year bond, and $365 million was held back for cash redemption. Treasury officials called the offering 'a complete success' and Secretary [George] Humphrey expressed his satisfaction with the 'successful placing' of the issue."

Disney's fiscal first quarter was mixed, as EBITDA fell 3% to $4.4 billion. Especially painful was the 2% decline in media networks, which was due to lower than expected operating income from ESPN. However, equity analyst Neil Macker thinks concerns over ESPN's results are overblown. Our investment thesis for Disney remains intact, and we are maintaining our wide moat rating and our fair value estimate of $134.

"The decline at media networks was due to increased sports rights costs at ESPN, foreign exchange impact, and the timing of the college football playoff games. However, affiliate fee growth remains strong at 4% despite worries about the decline in pay television subscribers."

Josh Charlson, director of manager research for alternative strategies, wrote about new Morningstar Medalists in the alternative funds category. He notes that it's not easy to become a medalist in the alternative funds space, as when it comes to alternatives, we tend to view new funds with a skeptical eye because they're often overpriced, untested, or lack transparency.

"A common thread for the funds earning medalist Morningstar Analyst Ratings is experienced management teams with specialized expertise running the strategies that power these funds. Given the complexity and technical difficulty of executing many alternatives strategies, veteran and accomplished management is critical."

Negative 1.8%
Bob Johnson, director of economic analysis, said trade data--imports and exports--were the biggest question marks in terms of GDP.

"[For the full year 2016] exports were down about 2.3%, which is not surprising given the stronger dollar, but what is surprising is that imports were almost down as much at 1.8%. That's a very unusual state of affairs. Usually, when the U.S. economy is doing relatively well compared to the rest of the world and your currency is stronger, what usually happens is imports go through the roof. And that just didn't happen this time."

Whether you use tax-preparation software or outsource to a CPA, director of personal finance Christine Benz shares four key strategies to ensure a smooth and worry-free tax season.

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