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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 March 3.

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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.

Snap Inc., the parent company of Snapchat, began trading Thursday after a successful initial public offering. Initially priced at $17, the stock ended its first trading day at over $26. Equity analyst Ali Mogharabi initiated coverage of Snap on Thursday with a $15 fair value estimate and a no-moat rating. Though Snapchat has attracted users and advertisers, Mogharabi points out that there is no guarantee that Snap will effectively monetize its users on a consistent basis; therefore he is not convinced that the firm will be able to generate excess returns on capital over the next decade. Mogharabi believes Snap shares are overvalued, and investors should wait for a pullback and a margin of safety before investing in this very high uncertainty name.

“In terms of Snap's addressable market, while digital ad budgets keep growing, so does the number of ad inventory providers in the space, and there is no guarantee that a bigger portion of new digital ad dollars will flow to Snap. We think wide-moats like Facebook and Alphabet's Google, that have proven the value of their ad inventories to advertisers over the years and together actually dominate the market, will probably keep taking more digital ad dollars over time.”

Director of personal finance Christine Benz says retirees often can exert more control over their tax bills than do working people. If you're no longer earning a paycheck, the taxes you'll owe will depend on your spending and where you draw your cash from: Social Security, your IRAs, a pension, and so on. In this article, she outlines 10 key ways retirees can reduce their tax bills.

According to the CME FedWatch Tool, which is based on CME Group 30-Day Fed fund futures prices, the market is currently predicting a 79.7% probability that the Federal Open Market Committee will raise interest rates at its March 15 meeting. 

As the stock market continues to climb to record highs, there is a lot of optimism about the economy. The ISM index on manufacturing reached a three-year high of 57.7% in February. Director of economic analysis Bob Johnson says that bullish number isn't backed up by durable goods and consumption data, however.

“I think that people are wanting to be optimistic. I think that there are a few things that are getting better, but I tell you, there is a lot of industries that are kind of looking plateau-ish to us. So, we are not terribly bullish, or terribly bearish, either, for that matter, on the current situation. We are kind of stumbling along, and maybe slightly better growth is what it looks like to us, but certainly not the strong data as the stock market and the ISM data would seem to indicate."

“Low-risk bond funds are a handy thing,” says director of manager research Russ Kinnel. Though he notes that they aren't a great choice for an account with a very long time horizon such as a 401(k), they can make great sense if you are putting away money for a near-term expenditure like paying college tuition or buying a house in a few years. He used the following criteria to compile this list of eight mild-mannered bond funds.

“I set out to find some really low-risk [bond] funds by ranking Morningstar 500 funds by their maximum drawdown since Feb. 1, 2007. I wanted to be sure to capture multiple periods of credit blowups and rising rates, though there hasn't been a lot of the latter over the past 10 years… I found eight bond funds with max drawdowns of between 0.65% and 2.56%. That's pretty comforting. The whole group got there by taking very little credit or interest-rate risk.”

In the wake of steep sales declines, employee layoffs, and store closures, it's not surprising that many department store stocks are trading at depressed prices. But senior analyst Bridget Weishaar thinks many of them may be cheap for a reason: department store traffic continues to decline every year, and the trend doesn't seem to be reversing anytime soon. Weishaar thinks a more compelling play is buying stocks of apparel manufacturers whose brands are featured in department stores, rather than buying the stores themselves. In this article we highlight three stocks that have been punished along with the retail sector; we think they have great prospects and are selling at attractive valuations. 

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Schwab US Dividend Equity ETF does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.