Investment Strategy
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 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.

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
Second Quarter Results for PepsiCo

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 a new analyst note below from Morningstar Research Services for PepsiCo PEP.

Best wishes,

David Harrell,
Editor, Morningstar StockInvestor

Pepsi's 2Q Performance Evidences Attractive Top-Line Trajectory; Shares Fairly Valued
by Sonia Vora, CFA | Morningstar Research Services LLC | 07-09-19

Pepsi's top-line momentum persisted in the second quarter, with organic sales positive in each of the firm’s six segments and up 4.5% overall (versus our roughly 4% full-year estimate). While we intend to reassess our assumptions (3% to 4% sales growth and average operating margin around 17% over the next five years), we aren't anticipating a material change to our $125 fair value estimate. We continue to view strengthened pricing (up 4% in the quarter) as the highlight of results, as we think it reflects the substantial brand strength that underpins our wide-moat rating for the firm. In this context, while core operating margin contracted nearly 130 basis points to 17.7%, we attribute this to increased investments in its brands (management cited a 56-basis-point lift in advertising and marketing spending as a percent of sales in the first half), which we view as a prudent means to support its long-term pricing power and sales trajectory.

We believe management's heightened focus on innovation and brand investments has already started to improve performance in segments like Quaker Foods North America (3% of sales), which posted its strongest quarter of organic sales growth in three years (up 3%), and PepsiCo Beverages North America (32% of sales). Within the North American beverage business, we were especially pleased to see a 4% increase in pricing (in line with the first quarter and accelerating from the 2% rate seen in fiscal 2018), supported by a shift to higher-margin packaging sizes and more premium, value-added products (like functional beverages). We appreciate that investments within the domestic beverage business seem to be well balanced between Pepsi's leading brands and more nascent offerings in higher-growth segments. As evidence, management noted sequential volume improvement for the Pepsi and Mountain Dew trademarks, high-single-digit volume growth for ready-to-drink coffee, and mid-single-digit volume growth in its water portfolio.

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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.

©2019 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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