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. 5.
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.
The broad-based Morningstar US Market index rose 7.22% in the third quarter and is now up 17.66% over the past 12 months.
Alex Bryan writes about the six questions to ask before investing in a strategic beta bond funds. These nonmarket-cap-weighted bond funds can seem like intriguing way to combine the best of passive and active. One question Bryan suggests:
How much credit- and interest-rate risk does the fund take?
There's a good chance that funds that regularly deliver market-beating returns are taking greater risk than the market. While credit- and interest-rate risk tend to pay off over the long term, they don’t always. And it's important to keep in mind that credit risk is positively correlated with equity risk, so funds that take greater credit risk may be less effective at diversifying equity risk.
Morningstar recently boosted our fair value estimate on two shopping center REITs. Analyst Kevin Brown says it is important to distinguish the rent that will and won't be as impacted by e-commerce. He believes both Federal Realty (FRT) and Kimco (KIM) are will positioned, and Kimco's 6.7% dividend yield is one of the higher among U.S. REITs.
Boston Beer (SAM) has seen its shares soar 72% over the last year, but analyst Sonia Vora thinks the volume growth which drove the rally isn't sustainable. She thinks shares are trading at a 50% premium to our fair value estimate.
Costco (COST) has an impressive quarter, but shares dropped on the news that Costco plans to disclose a material weakness in its internal control, stemming from the scope of employees and contractors granted access to reporting systems. Analyst Zain Akbari doesn't expect the disclosure to alter his valuation, and thinks the major sell-off is another sign that the stock is priced to perfection and that investors should wait for a bigger drop before diving in. He thinks shares are worth $175 each.
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