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 accounts owned by Morningstar, Inc.
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Featured Posts
OPEC Announces Oil Production Cuts
It was a relatively quiet week for analyst updates -- ExxonMobil XOM was tagged in the analyst note below from Morningstar Research Services about OPEC+ production cuts.

Best wishes,

David Harrell,
Editor, Morningstar StockInvestor

OPEC+ Defends Oil Prices With New Production Cut While Consolidating Influence Around the Saudis
by Stephen Ellis | Morningstar Research Services LLC | 6-06-23

On June 4, OPEC+ announced about 1.4 million barrels per day of production cuts. Saudi Arabia would cut 1 million barrels per day production cut in July 2023 for one month, though it can be extended, which we consider a realistic cut, while the remaining 400,000 net barrels are aligning quotas to actual production levels, and we'd consider paper barrels. The previously announced 1.6 million barrels per day cut (or about 600,000-700,000 barrels per day allowing for quota underproduction) by OPEC cut in April has now been extended through the end of 2024 from through the end of 2023. Our fair value estimates and moat ratings for our U.S. oil and gas coverage are unchanged following the announcement. We'd flag Equitrans and ExxonMobil as undervalued.

With the earlier cuts only beginning in May and having a limited impact so far, we see the latest announcement more about defending oil prices with the threat of further production cut extensions. Brent prices have fallen about 10% since the start of April to about $76 a barrel currently. At the time, we felt, as likely OPEC+ did, that the cuts would be enough to support higher oil prices in the near term with a potential spike to $100 a barrel remaining a possibility in the second half of the year.

Thus, the decline in price has likely frustrated the Saudis. Comments from Saudi Arabia ahead of the meeting have been unusually pointed and focused heavily on prices and oil short sellers, indicating in our view, the country is under growing pressure to keep prices high (above $80 a barrel) to ensure enough revenue to fund planned social spending over the next few years. Essentially, the cut and extension threats are widening the gap further in what we already saw as an undersupplied oil market in the second half of 2023 from our April observations. OPEC+ is also somewhat emboldened to cut production knowing that U.S. producers are not likely to steal share.

We see several key takeaways:

In a move that demonstrates Saudi Arabia's growing consolidation of influence within the cartel, several OPEC members including Angola, Congo, Nigeria, and Guinea had their baseline quotas reduced by a total of about 625,000 barrels per day. All four countries had been unable to meet their quotas for some time due to political, investment, or reservoir-related challenges. The reduced quotas more closely align actual production with quotas, meaning future production announcements will be more closely linked to actual production changes versus us having to interpret the level of shadow barrels. In contrast, the UAE's quota was upped about 200,000 barrels per day, more closely hewing to actual production levels.

Next, OPEC+ openly acknowledged the uncertainty over the amount of production that Russia is supplying the market presently. The OPEC+ quota is currently 9.828 million barrels per day. Russia has indicated at various times that it could cut production as low as 9.3 million barrels per day for varying timeframes. We see this uncertainty as linked to the Saudi cuts. The uncertainty over Russian production, and perhaps the reluctance of Russia to provide additional clarity or assurance around future production levels likely contributed the Saudi Arabia shouldering the burden of the 1 million barrels per day of production cuts alone. The Saudis called this their "Saudi lollipop" reflecting their confidence that they can achieve the announced cuts versus the April "voluntary" cuts outside of normal OPEC channels, and thus sending a strong positive price signal to the markets.

While we think the key takeaways here are primarily price, supply, and Saudi Arabian-focused, we note that concerns around the quality of the recovery for Chinese oil demand are lingering in the background. While the International Energy Agency acknowledged that it was upping its oil demand forecast in its May 2023 report, largely due to Chinese strength, with Chinese oil demand contributing nearly 60% of its expected 2.2 million barrels per day of demand growth in 2023. This revision places Chinese demand growth closer to 1.3 million barrels per day in 2023, compared with earlier expectations by the IEA, as we noted in April, which had demand growth of about 960,000 barrels per day. At the same time, we are seeing other indicators raise concerns about the maintainability of the growth, primarily around industrial activity. Some examples include a 13% decline in Chinese imports of copper through the first few months of 2023 per Capital Economics, an 8% decline in the number of trucks on Chinese highways through April 2023 per Ministry of Transport data, and a boost in Chinese diesel inventory supplies toward eight-month highs according to OilChem.

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


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The Tortoise and Hare strategies are managed by Morningstar Investment Management LLC. Morningstar Investment Management’s subsidiary offers these strategies through a discretionary investment advisory service (“Advisory Service”). The "Net of Fees" performance shown reflects the deduction of a model fee equal to the maximum advisory fee that could be charged to the strategy through Morningstar Investment Services’ advisory program, brokerage or other commissions, and other expenses that a client paid in connection with the advisory services they received, and are calculated by deducting these fees from the gross returns.

 
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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 accounts owned by Morningstar, Inc. 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

Michael Corty, CFA, is the Head of U.S. Equity Strategies and a Portfolio Manager for Morningstar Investment Management LLC. Michael joined the group as a portfolio manager in December 2013.

Previously, he was a senior equity analyst in Morningstar, Inc.'s equity research department where he also served as a voting member of the economic moat committee. Michael holds a bachelor's degree from Loyola Marymount University and an MBA from Johnson Graduate School of Management at Cornell University.

Grady Burkett, CFA, is a Portfolio Manager with Morningstar Investment Management LLC. Grady joined the group as a portfolio manager in December 2022.

Prior to joining Morningstar Investment Management, Grady was an analyst and portfolio manager at Diamond Hill, an independent and registered investment adviser. Grady started his investment career in Morningstar, Inc.'s equity research department where he progressed in several roles on the technology sector team as an equity analyst, strategist, and director of the team. Grady received his B.S. and M.S. in Mathematics from Wright State University. He is a member of the CFA Institute and the CFA Society of Columbus, Ohio

Investment Strategy



Tortoise Portfolio. The Tortoise targets undervalued companies that possess durable competitive advantages (as measured by their Morningstar Economic Moat Rating) and strong balance sheets.

Hare Portfolio. The Hare focuses on companies with strong and growing competitive advantages (as measured by their Morningstar Economic Moat Rating). It uses a “growth at a reasonable price” approach, seeking companies with above-average earnings-per-share growth whose shares are trading at reasonable multiples of earnings.