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 Jan. 4.
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 market took a wild ride this week. Stocks plunged on Thursday after Apple’s (AAPL) profit warning and a weak manufacturing survey raised global growth fears. Then an upbeat jobs report and soothing words from Fed Chair Jerome Powell sent stocks surging on Friday. It can be hard to keep your bearings when the market is this volatile, but Christine Benz shared three strategies to help drown out the noise including only looking at your portfolio during scheduled checkups.
Apple issued a rare earnings warning this week as iPhone sales in Greater China were well below expectations. Morningstar’s Abhinav Davuluri thinks the firm’s long-term prospects are still bright.
Overall, we are maintaining our $200 fair value estimate, as cuts to our China iPhone forecasts are offset by stronger services and wearables expectations, and we see an adequate margin of safety as Apple’s growth trajectory lies with its ability to better monetize its installed base, rather than grow iPhone units in a largely saturated smartphone market.
Director of North American equity research Dan Rohr took stock of equity valuations at the end of 2018 and believes that on the whole stocks are starting to look compelling for the first time in a while.
From a bottom-up perspective, global equities are beginning to look attractive. The median stock across our 1,500-plus coverage trades at a 14% discount to our estimate of fair value. Entering the fourth quarter, we had pegged the typical stock as fairly valued. Not surprisingly, we also see more strong buying opportunities, with 6% of our coverage trading at 5 stars, up from 2% a few months ago.
Bristol-Myers Squibb (BMY) is buying Celgene (CELG) for $74 billion in a deal that Morningstar’s Karen Andersen thinks is “a very logical buildout of Bristol’s pipeline in oncology and immunology.”
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