Investment Strategy

Dear Investor:

Thank you for signing up for Morningstar MSIInvestor. We hope the information helps you make MSI a valuable tool in meeting your financial goals.

Download your Morningstar MSI Guide

MSI are powerful instruments that are often ignored by investors. But as someone who believes that MSI can be a smart tool for meeting a variety of financial goals, I'd like to make options accessible to a broad range of investors. I hope that MSIInvestor does just that for you.

I promise you'll get the fundamentals, applied intelligently and explained in plain English, and all of it is tied to Morningstar's fundamental company research.

Bottom line, we'll help you invest wisely with MSI.

Regards,

Matthew Coffina
Editor, Derivatives Investing Strategist

Investment Strategy
What is the goal of the Tortoise Portfolio? The Tortoise Portfolio aims to outperform the S&P 500 index over time. Companies in this portfolio tend to be mature, relatively slow-growing, and with moderate to low risk. New purchases must have an economic moat, preferably wide. We attempt to tilt the portfolio toward companies with at least stable competitive advantages (stable moat trends).

What is the goal of the Hare Portfolio? The Hare Portfolio aims to outperform the S&P 500 index over time. Companies in this portfolio tend to be faster-growing, with both higher risk and higher return potential than those in the Tortoise. New purchases must have an economic moat, preferably wide. We attempt to tilt the portfolio toward companies with growing competitive advantages (positive moat trends).

Investment Strategy
Morningstar StockInvestor invests in companies with established competitive advantages and generous free cash flows, trading at discounts to their intrinsic values. These are core holdings, with more conservative ideas appearing in the Tortoise Portfolio and more aggressive ideas in the Hare Portfolio. We expect both portfolios to beat broad U.S. stock index benchmarks, such as the S&P 500, over rolling three-year periods.
About the Editor
As editor of Morningstar's StockInvestor newsletter, Matthew Coffina manages the publication's two real-money, market-beating model portfolios — the Tortoise and the Hare. Matt was previously a senior healthcare analyst, covering managed care and pharmaceutical services companies. Matt also developed the discounted cash flow model used by Morningstar analysts to assign fair value estimates to most of the companies in its global coverage universe.

Matt joined Morningstar in 2007. He holds a bachelor's degree in economics from Oberlin College and also holds the Chartered Financial Analyst (CFA) designation.

 
May 29, 2016
Welcome !
About Paul Matthew Photo
Matthew Coffina, CFA
Editor,
Morningstar StockInvestor
As editor of Morningstar's StockInvestor newsletter, Matthew Coffina manages the publication's two real-money, market-beating model portfolios -- the Tortoise and the Hare. Matt was previously a senior healthcare analyst, covering managed care and
Featured Posts
Roundup, 5/27/16 -- General Dynamics Our Top Pick in Fully Valued Defense Sector

It was a quiet week in the lead-up to the long Memorial Day weekend. There was only one analyst note relevant to our holdings: A new analyst assumed coverage of the defense industry. He still finds defense stocks to be fully valued on the whole, but his top pick is Tortoise holding General Dynamics GD. Additional details can be found below.

To those who have served our country, thank you!

Regards,

Matt Coffina, CFA
Editor, Morningstar StockInvestor
 
Email: matthew.coffina@morningstar.com

Disclosure: I own all of the stocks in the Tortoise and Hare in my personal portfolio.

------------------------------------------------------------

Morningstar Stock Analyst Note

A Fresh Take on Defense Stocks: Despite Favorable Moats and Markets, We Are Cautious on the Sector
- by Chris Higgins

We are transferring coverage of major U.S. defense contractors--General Dynamics, Lockheed Martin, Northrop Grumman, and Raytheon--to a new analyst. As a group, the stocks look fairly valued to overvalued, and we are cautious on the space overall.

The market-capitalization-weighted price/fair value estimate across our defense coverage is currently at 1.10. Still, we like the moats: Lockheed (wide), General Dynamics (wide), Raytheon (narrow), and Northrop (narrow). And we have upgraded the moat trend to positive from stable for Northrop and Lockheed. In addition, market trends look favorable thanks to the U.S. defense budget returning to modest but sustainable growth.

General Dynamics is the top pick in our coverage, with a fair value estimate of $145 and a 3-star rating. The company’s management team judiciously allocates shareholder capital and continues to focus on margins as opposed to dilutive sales growth. In addition, the company possesses a wide economic moat because of its position in business jets, shipbuilding, and armored vehicles. General Dynamics' returns have historically outpaced peers, and we expect it to continue to post better ROICs than other defense contractors.

We assign Raytheon a $131 fair value estimate, resulting in a 3-star rating. We think its sales exposure to Asia-Pacific remains a positive, and we like its book of Asia-Pacific business. However, its Middle East exposure (15% of 2015 sales) may create a midterm headwind as lower oil prices pinch budgets in the region.

Lockheed and Northrop both garner 2 stars, and we see downside of about 15% for each of these names. Despite their price tags, these are solid businesses. Lockheed has a strong position in fighter aircraft via the F-35, while Northrop dominates the bombers thanks to its recent $80 billion Long Range Strike Bomber win. Although Boeing has a 3-star rating, we think most of the upside lies within the commercial aerospace business.

 
Contact Us | © Morningstar StockInvestor
Customer Support
Product Support
Inquiries regarding your subscription such as address changes, missing/damaged issues, etc.
Phone: 1-800-957-6021 | Mon-Fri 8:30AM-5:00PM
Inquiries regarding technical issues such as logging in or downloading
Phone: 1-312-424-4288 | Mon-Fri 8AM-6PM
E-mail: newslettersupport@morningstar.com
Product Sales
Inquiries regarding your subscription renewal, billing or to learn about other Morningstar investment publications and resources
Phone: 1-866-608-9570 | Mon-Fri 8AM-5PM
E-mail: ussales@morningstar.com
Contact Your Editor