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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 Morningstar.com. 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.

 
Nov 24, 2017
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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 11/22/2017 -- Results for Analog Devices and Lowe's

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 from Morningstar Research Services* for Analog Devices ADI and Lowe's LOW below.

Happy Thanksgiving,

David Harrell,
Editor, Morningstar StockInvestor

Analog Devices Reports Solid 4Q Results but the Music Might Be Slowing Down; Raising FVE to $90
by Brian Colello, CPA | Morningstar Research Services LLC | 11-21-17

Analog Devices reported solid fiscal fourth-quarter earnings but provided investors with a muted first-quarter forecast (after adjusting for an extra week in the period) with some soft spots across certain business-to-business, or B2B, products. We raise our fair value estimate for wide-moat Analog Devices to $90 per share from $82, mostly due to the time value of money as we update our valuation model, and we view shares as fairly valued.

Analog Devices' revenue in the October quarter was $1.54 billion, up 8% sequentially and toward the high end of the firm's previously forecast range of $1.45 billion-$1.55 billion as discussed in August. The sequential growth was predictably driven by the firm's content in Apple's iPhone 8 series, but sales were flattish year over year. Given Analog Devices' chip is not in the iPhone X, the firm again confirmed consumer revenue will be down meaningfully in fiscal 2018. Communications revenue was also up 5% sequentially and 7% year over year, with Analog Devices noting particular strength in chips sold into macro base stations and small cells. Meanwhile, the firm's largest segment, industrial, was up 3% sequentially and a robust 24% year over year. On the profitability front, higher sales levels enabled the firm to expand its adjusted gross margins by 40 basis points to 70.9%.

For the January quarter, which is a 14-week period versus 13 weeks in most other quarters, revenue is expected to be in the range of $1.44 billion-$1.54 billion, which would represent a 0%-7% sequential sales decline. After adjusting for artificial boost for the 14th week, Analog Devices expects B2B revenue to be down mid-single digits, which we view as a relatively disappointing near-term forecast in light of strong growth projected by the firm's peers a few weeks ago. The firm appears to be plagued by a pause in automotive demand for battery management systems, mostly deployed in Chinese electric vehicles after several prior quarters of hearty growth.

Lowe's Top Line Bolstered by Weather-Related Events
by Jaime M. Katz, CFA | Morningstar Research Services LLC | 11-21-17

While third-quarter sales results at wide-moat Lowe's beat our implied outlook, with comparable-store growth of 5.7% versus our 3.8% estimate, the company was helped by $200 million in revenue and 1.4% in comps from hurricane-related sales. Given that Lowe's is maintaining its full-year outlook for 3.5% comp store and 5% revenue increases, in line with our prior forecast, which included comp store and revenue growth of 3.4% and 5.1%, respectively, we don't anticipate any material change to our $93 fair value estimate. This does imply a decent slowdown in the company's fourth quarter (lapping a 53-week year in 2016 as well as a sales bump from Hurricane Matthew and Louisiana flooding), with comps around 2.5% and revenue that declines, although we believe these numbers could be a tad light as hurricane-related sales linger into the final quarter. The shares are trading at 13 times our tax-adjusted 2018 earnings per share estimate, and we think the company has the ability to deliver midteens EPS growth over the next five years, rendering the stock slightly undervalued.

While this marks another quarter in which Lowe's business was not quite as robust as that of peer Home Depot (which put up comps of nearly 8%), the performance was still solid for a mature business that has room for positive sales growth in the brick-and-mortar space. We expect housing starts to rise from an estimated 1.22 million in 2017 to 1.55 million in 2019, bringing further demand for home-improvement projects as consumers move into these new locations and leave their current residences. Sustained turnover, still-low interest rates, and generally positive economic support (employment, home prices, confidence) should offer continued demand in the category over the next few years, supporting retailers like Home Depot and Lowe's.

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*Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. Analyst ratings are subjective in nature and should not be used as the sole basis for investment decisions. Analyst ratings are based on Morningstar’s analysts’ current expectations about future events and therefore involve unknown risks and uncertainties that may cause such expectations not to occur or to differ significantly from what was expected. Analyst ratings are not guarantees nor should they be viewed as an assessment of a stock's creditworthiness. Ratings, analysis, and other analyst thoughts are provided for informational purposes only; references to securities should not be considered an offer or solicitation to buy or sell the securities.

©2017 Morningstar, Inc. All rights reserved. The Morningstar name and logo are registered marks of Morningstar, Inc. The information contained in this document is the proprietary material of Morningstar, Inc. Reproduction, transcription, or other use, by any means, in whole or in part, without the prior written consent of Morningstar, Inc., is prohibited. All data presented is based on the most recent information available to Morningstar, Inc. as of the release date and may or may not be an accurate reflection of current data.  There is no assurance that the data will remain the same.

Disclosure:
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.

Opinions expressed are as of the current date and are subject to change without notice. Morningstar, Inc. and Morningstar Investment Management LLC shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, the information, data, analyses or opinions or their use. This commentary is for informational purposes only and has not been tailored to suit any individual.

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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