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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 Oct. 20.

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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.

$1.5 billion
Netflix posted a strong quarter in terms of subscriber growth, but the firm continues to burn cash at a faster pace--a free cash flow loss of over $1.5 billion in the first three quarters of 2017 versus a loss of over $1.0 billion over the same period last year. Equity analyst Neil Macker said despite the beat on subscribers, his long-term thesis for the stock remains in place.

"We are retaining our narrow moat rating but raising our fair value estimate to $80 from $73 to account for the recently announced price increase."

Thirty years after the stock market decline that would come to be known as Black Monday, vice president of research John Rekenthaler weighs in on the lessons learned.

In this video, director of manager research Russ Kinnel examines four funds that have high costs and Neutral or Negative ratings. These funds are prime examples that costs are the best predictor of future performance, he says. 

Billions of years
An article in The Wall Street Journal (subscription required) explored Google's race to develop the world's first quantum computer, an "ultra-powerful machine [that] has the potential to disrupt everything from science and medicine to national security."

"Companies and universities around the world are racing to build these machines, and Google, a unit of Alphabet Inc., appears to be in the lead. Early next year, Google’s quantum computer will face its acid test in the form of an obscure computational problem that would take a classical computer billions of years to complete. Success would mark 'quantum supremacy,' the tipping point where a quantum computer accomplishes something previously impossible. It’s a milestone computer scientists say will mark a new era of computing, and the end of what you might call the classical age."

If you haven't evaluated your Medicare Part D prescription drug coverage in a while, now is a good time: Medicare's fall open enrollment period began Oct. 15 and runs until Dec. 7. This is the time when enrollees can re-shop their prescription drug coverage (Part D) or Advantage plans--the managed care all-in-one alternative to traditional Medicare. Contributor Mark Miller offers a checklist for enrollees and takes a look at the nine largest Part D prescription drug plans.

Manager research analyst Adam McCullough examined the 10 largest sponsors of index mutual funds and index-tracking exchange-traded funds to determine whether strong stewardship is as relevant for investors in passively managed funds as it is for active-fund investors. The conclusion: Good stewardship always matters. 

“We found that firms that align their interests with those of fundholders by charging low fund fees, sharing a greater portion of revenues derived from securities lending, taking a disciplined approach to product development, and investing in portfolio management infrastructure have delivered above-average peer-relative performance."

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