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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 July 13.

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.

Head of global manager research Jeff Ptak pointed out that actively managed funds accounted for about 63% of U.S. open-end and exchange-traded-fund assets on May 31, 2017, but only three years prior, it was around 72%. If the industry fails to adapt in necessary ways, Ptak believes passive funds could capture another 10 percentage points of fund market share in the next decade or so.

"Passive funds, including strategic-beta ETFs, recently held around $6.2 trillion of $16.5 trillion in U.S. fund assets. Given a semiconservative 4% annual organic growth rate on the U.S. fund industry for the next decade, that would vault passive assets to around $11 trillion by 2027. Depending on assumptions for sources of future growth (market appreciation or flows), that would imply at least $1 trillion in outflows from active."

International-stock funds have had a good run in 2017, but this brief period of outperformance is unlikely to mean that most investors are suddenly overexposed to non-U.S. equities. Investors do need realistic expectations, but it might actually make sense to consider adding to foreign positions. In this video, Morningstar analysts discuss three highly rated international-equity funds.

In its June 14 policy statement, the Fed released details about its balance sheet normalization program. The central bank in July released additional details about that program, including its expectations for the size of the balance sheet by 2025 under various scenarios. (The Fed's balance sheet currently comprises $4.5 trillion worth of Treasuries and other assets.)

The Morningstar US Dividend Growth Index focuses on companies with a history of dividend growth and the ability to sustain it. To find 14 high-quality companies with sustainable and growing yieldswe screened the index looking for companies with wide economic moats, which means we think they have advantages that will allow them to fend off competitors and remain profitable for at least 20 years. We also insisted the stocks carry fair value uncertainty ratings of medium or low, ensuring that we zeroed in on companies whose fair value estimates our analysts were most confident in. 

 MSC Industrial's (MSM) shares traded down sharply after the company released its fiscal third-quarter results and fourth-quarter outlook. Equity analyst Brian Bernard thinks the sell-off was an overreaction, and as a result, MSC's price has come down to an appealing level; as of July 13, its price/fair value was 0.79.

"The company reported solid headline figures, with sales of $744 million and earnings per share of $1.09 meeting management's guidance and consensus estimates. We believe the sell-off was in response to MSC's weak gross margin performance and guidance. However, we think the market's reaction was overblown. We are maintaining our $91 fair value estimate, which puts MSC in 4-star territory."

Morningstar's manager research group has been adding many funds to coverage in recent months. Director of manager research Russ Kinnel brings readers up to speed on five of the better ones in this article

Tennis all-star Venus Williams is on the verge of what could be her most meaningful victory yet at her 20th Wimbledon, The New York Times reported. At 37, not only is she at an age where many of her peers have "moved on to coaching," the Times points out, but many people have been skeptical of her odds of winning.

" 'If Venus wins it, I think this one might mean more to her than any other one just because of everybody writing her off, no one thinking she could ever continue to play the level that she wanted to play,' her coach, David Witt, said."

The pace of change in our world has been breathtaking in recent years, with technological innovation allowing us to carry powerful computers in our pockets and drive more fuel-efficient electric hybrid cars. And the ground has been shifting beneath investors' feet, too, says director of personal finance Christine Benz. In this article, she discusses three notable developments and their implications for investors.

Most Popular Articles, Videos, and Securities

Most Popular Articles 

Most Popular Videos  

Most Requested Stock Quotes
Berkshire Hathaway

 Most Requested Stock Analyses
L Brands
Hi-Crush Partners
O'Reilly Automotive
General Electric

Most Requested Fund Quotes
Vanguard 500 Index Investor
Fidelity Contrafund
Vanguard Dividend Growth

Vanguard Wellesley Income
Dodge & Cox Stock

 Most Requested Fund Analyses
Vanguard International Dividend Appreciation
Fidelity Low-Priced Stock
Dodge & Cox Stock
Vanguard Dividend Growth
Dodge & Cox Income

Most Requested ETF Quotes
Vanguard Total Stock Market ETF
Vanguard S&P 500 ETF
PowerShares QQQ ETF 
Vanguard High Dividend Yield ETF

 Most Requested ETF Analyses
Vanguard International Dividend Appreciation ETF
Vanguard Dividend Appreciation ETF
Vanguard High Dividend Yield ETF
iShares US Preferred Stock ETF
Vanguard FTSE Developed Markets ETF does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.