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Tortoise Portfolio. The objective of Morningstar, Inc.’s Tortoise Portfolio is to focus on “high-quality” businesses, defined as having both durable competitive advantages and strong balance sheets. These are often well-established market leaders with economic moats (preferably wide). Morningstar’s aim for the portfolio is to generate risk-adjusted returns that outperform the S&P 500 over a full market cycle.

Hare Portfolio. The objective of Morningstar, Inc.’s Hare Portfolio is to seek long-term capital appreciation ahead of the S&P 500 Index, focusing on companies with strong and growing competitive advantages. Morningstar is willing for the Hare to accept greater risk in exchange for higher total return potential.

About the Editor
David Harrell is the editor of the Morningstar StockInvestor, a monthly newsletter that focuses on a wide-moat stock investing strategy. For illustration purposes, issues highlight activities pertaining to Morningstar, Inc. portfolios invested in accordance with a strategy that seeks to focus on companies with stable or growing competitive advantages. David served in several senior research and product development roles and was part of the editorial team that created and launched He was the co-inventor of Morningstar's first investment advice software.

David joined Morningstar in 1994. He holds a bachelor's degree in biology from Skidmore College and a master's degree in biology from the University of Illinois at Springfield.

Our Portfolio Managers

Matthew Coffina, CFA, is the portfolio manager for Morningstar Investment Management LLC’s Hare strategy. 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.

Michael Corty, CFA, is the portfolio manager for Morningstar Investment Management LLC’s Tortoise strategy. Before focusing his attention on the Tortoise, Michael co-managed five equity strategies offered by Morningstar Investment Management LLC and Morningstar Investment Services LLC since December 2013. Michael was previously a senior equity analyst on Morningstar Inc.’s equity research team covering companies in the media, business services, and consumer industries. Michael also spent several years on Morningstar’s moat committee, which assigns economic moat and moat trend ratings to their global coverage.

Prior to joining Morningstar in 2004, Michael worked at a public accounting firm and in the business lending arm of a major commercial bank. He has an undergraduate accounting degree from Loyola Marymount University, an MBA from Cornell University and is a CFA charterholder.

About the Editor David Photo
David Harrell
Editor, Morningstar StockInvestor
David Harrell is the editor of the Morningstar StockInvestor, a monthly newsletter that focuses on a wide-moat stock investing strategy. For illustration purposes, issues highlight activities pertaining to Morningstar, Inc. portfolios
Featured Posts
Roundup 11/16/2018 -- Recent Activity by Berkshire Hathaway

StockInvestorSM focuses on the activities of portfolios of Morningstar, Inc. that are invested in accordance with the Tortoise and Hare strategies. These portfolios are managed by Morningstar Investment Management LLC, a registered investment adviser, which manages other client portfolios using these strategies.

Please see new analyst notes below from Morningstar Research Services for Berkshire Hathaway BRK.B and Tencent TCEHY. Tortoise portfolio manager Michael Corty trimmed the portfolio's stake in Berkshire this morning and added to its Alphabet GOOG position. Please see his trade alert for details.

Best wishes,

David Harrell,
Editor, Morningstar StockInvestor

Berkshire Hathaway Initiates Stakes in JPMorgan Chase, Oracle, PNC Financial, and Travelers in 3Q
by Greggory Warren, CFA | Morningstar Research Services LLC | 11-14-18

There were a few surprises in wide-moat Berkshire Hathaway's third-quarter 13-F filing. While we expected to see buying activity, given the company's recent 10-Q highlighted $17.7 billion in purchases (offset by $5.2 billion of sales), our belief had been that much of that capital had been directed to narrow-moat Apple, with Berkshire having already acquired an additional 86.6 billion shares in the technology firm during the first half of the year and CEO Warren Buffett noting in late August that Berkshire had bought more Apple shares during the quarter. In reality, Apple ended up being one of the smallest purchases (523,000 shares for an estimated $107 million) for the insurer during the period, with Berkshire dedicating close to $14 billion to the purchase of stocks of financial services firms -- namely narrow-moat Bank of America (198.2 million shares for an estimated $5.7 billion), narrow-moat JPMorgan Chase (35.7 million shares for around $3.9 billion), wide-moat US Bancorp (24.3 million shares for about $1.3 billion), narrow-moat Goldman Sachs (5.1 million shares for an estimated $1.1 billion), no-moat PNC Financial (6.1 million shares for around $826 million), wide-moat Bank of New York Mellon (13.0 million shares for about $685 million), and narrow-moat Travelers Companies (3.5 million shares for some $447 million). Of those names, JPMorgan Chase, PNC Financial and Travelers were new to Berkshire's equity portfolio.

Other purchases included a new $2 billion stake in wide-moat Oracle, and smaller purchases of additional shares of Delta Air Lines and General Motors. These purchases were offset in part by the elimination of Berkshire's stakes in Walmart and Sanofi Aventis, as well as sales of shares of Phillips 66 (which netted an estimated $2.2 billion), Wells Fargo, United Continental, American Airlines Group, Southwest Airlines and Charter Communications (some of which were ongoing adjustments to keep Berkshire's total ownership stake below 10%).

These changes in the portfolio, as well as market movements, during the September quarter had a slight impact on Berkshire's top stock holdings. At the end of the third quarter, the company's top 5 positions -- Apple (25.8%), Bank of America (11.7%) Wells Fargo (10.5%), Coca-Cola (8.4%) and Kraft Heinz (8.1%) -- accounted for 64.5% of its $221.0 billion portfolio (down from 65.9% at the end of the second quarter, when the stock portfolio had an ending balance of $195.6 billion). Meanwhile, the insurer's top 10 holdings -- which now includes American Express (7.3%), US Bancorp (3.0%), Moody's (1.9%), Goldman Sachs (1.9%) and JPMorgan Chase (1.8%) -- accounted for 80.3% of the portfolio (versus 82.0% previously).

Tencent Remains a Strong Buy
by Chelsey Tam | Morningstar Research Services LLC | 11-15-18

We are reducing the fair value estimate of wide-moat Tencent to HKD 499 per share from HKD 590 per share and we continue to think Tencent is undervalued. We now expect a 10-year CAGR of 20% for operating profit, compared with 29% previously, and a 10-year CAGR of 19% for revenue versus 29% previously. (Editor's note: The FVE for the ADR shares was reduced to $64.) The others revenue segment, which is mainly composed of payment and cloud, has slowed down faster than our expectations in recent quarters, leading to a 10% reduction in our 10-year others revenue CAGR to 30%. As a result of a pause in games approval in China, we now assume year-over-year online gaming revenue growth rate to be 6% in 2018. We estimate there will be a rebound in online gaming revenue growth to 16% in both 2019 and 2020 as approval resumes in mid-2019. Our assumption of lower revenue growth is partially offset by higher margin assumptions as margins hold up better than our expectations in recent quarters. We believe operating margin (excluding other gains and interest income) will gradually reduce due to investments to transition to industrial Internet and will bottom at 22.5%, and as scale amasses, we expect operating margin to increase to 30.3% by 2027. Given wide-moat Tencent's strong network effect with 1.1 billion of monthly active users of Wechat, we believe temporary suspension of game approval and weak macro provides a good opportunity to accumulate this high-quality name. Tencent's repurchase of 2.8 million shares is a testimonial of our view. We think that smaller game companies will be squeezed out during the regulatory headwinds, and Tencent will be able to gain market share.


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The commentary, analysis, references to, and performance information contained within Morningstar® StockInvestorSM, except where explicitly noted, reflects that of portfolios owned by Morningstar, Inc. that are invested in accordance with the Tortoise and Hare strategies managed by Morningstar Investment Management LLC, a registered investment adviser and subsidiary of Morningstar, Inc. References to "Morningstar" refer to Morningstar, Inc.

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The information, data, analyses, and opinions presented herein do not constitute investment advice, are provided as of the date written, are provided solely for informational purposes and therefore are not an offer to buy or sell a security. Please note that references to specific securities or other investment options within this piece should not be considered an offer (as defined by the Securities and Exchange Act) to purchase or sell that specific investment.

This commentary contains certain forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially and/or substantially from any future results, performance or achievements expressed or implied by those projected in the forward-looking statements for any reason.

Investments in securities are subject to investment risk, including possible loss of principal. Prices of securities may fluctuate from time to time and may even become valueless. Securities in this report are not FDIC-insured, may lose value, and are not guaranteed by a bank or other financial institution. Before making any investment decision, investors should read and consider all the relevant investment product information. Investors should seriously consider if the investment is suitable for them by referencing their own financial position, investment objectives, and risk profile before making any investment decision. There can be no assurance that any financial strategy will be successful.

Common stocks are typically subject to greater fluctuations in market value than other asset classes as a result of factors such as a company's business performance, investor perceptions, stock market trends and general economic conditions.

All Morningstar Stock Analyst Notes were published by Morningstar, Inc. The Weekly Roundup contains all Analyst Notes that relate to holdings in Morningstar, Inc.'s Tortoise and Hare Portfolios. Morningstar's analysts are employed by Morningstar, Inc. or its subsidiaries. In the United States, that subsidiary is Morningstar Research Services LLC, which is registered with and governed by the U.S. Securities and Exchange Commission.

David Harrell may own stocks from the Tortoise and Hare Portfolios in his personal accounts.

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