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
Uber Makes Progress Toward Profitability
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 and updates below from Morningstar Research Services for Tencent TCEHY and Uber Technologies UBER.

Also, I'll be out of the office next week, so we won't be sending a weekly update on October 1st. Any analyst notes or updates from that week will be included in the October 8th update.

Best wishes,

David Harrell,
Editor, Morningstar StockInvestor

Tencent's FVE Trimmed by 3% Amid Scrutiny; Don't Forget Its Undermonetization and Long-Term Growth
by Chelsey Tam | Morningstar Research Services LLC | 09-20-21

We are lowering wide-moat Tencent's fair value estimate by 3% to HKD 778 from HKD 800 ($103 to $100 for ADR shares), due to a cut in fintech revenue to reflect support to small and medium enterprises, or SMEs, (negative HKD 14), social initiatives (negative HKD 8), a reduction in gaming revenue in this and next year due to suspension of game approval and reduced minors' contribution (negative HKD 4), and rolling the model (plus HKD 4). We reduced 2021 and 2022 adjusted operating profit by 21% and 29% compared with our previous assumptions. Nevertheless our 10-year revenue and adjusted operating profit CAGR remain unchanged and we continue to be bullish in the long term.

The news of Tencent potentially launching paid cloud services to Weixin users to store their conversations shows Tencent's ability to monetize is often underestimated by investors. The other examples include successfully incorporating short form videos in Weixin after limited success in launching a separate short video app. These stem from the fact that Tencent has strong network effect stemming from its user base of 1.3 billion and its irreplaceable status of acquaintance networking, upon which there are many monetization opportunities. We remind investors that Tencent: 1) still has further revenue opportunities in Weixin moments and short video; 2) has a good chance of succeeding in the overseas mobile game market (which is supported by the government); 3) had three-digit growth in GMV last year in its mini-programs; 4) will continue to benefit from companies moving to cloud services as one of the top players in terms of market share; and 4) has yet to launch more fintech products. Therefore, despite various crackdowns on the Internet sector, we remain bullish on Tencent's long-term share price performance.

Uber's Latest Outlook Indicates Further Progress Toward Profitability; Shares Remain Attractive
by Ali Mogharabi | Morningstar Research Services LLC | 09-21-21

We are maintaining our $69 fair value estimate for narrow-moat and 4-star rated Uber. The firm filed an 8-K with the SEC on the morning of Sept. 21 in advance of a presentation at an investor conference later that day, providing an updated outlook for the second half of the year. The firm stated that it generated positive adjusted EBITDA in July and August. In addition, Uber slightly increased its third-quarter adjusted EBITDA guidance and is now more confident that it will generate positive adjusted EBITDA in the fourth quarter. We are not making any changes to our projections. In our view, the better outlook provided by the firm is a result of Uber's network effect moat source remaining intact, which we think has allowed the firm to lower driver acquisition spending even as driver supply has continued to increase. The integration of Uber's mobility and delivery platforms will continue to ease cross-selling to not only consumers but also drivers, thereby lowering acquisition costs for both, which should result in higher take rate and further margin improvement.

Uber's third-quarter adjusted EBITDA guidance midpoint is now at breakeven versus its previous guidance of a smaller than $100 million loss. It also guided for adjusted EBITDA between breakeven and $100 million for the fourth quarter. While the firm narrowed its third-quarter gross bookings outlook to $22.8 billion-$23.2 billion (from $22 billion-$24 billion), the midpoint is unchanged at $23 billion.

Lastly, the latest figures provided by Bloomberg Second Measure indicate that Uber continues to dominate the U.S. ridesharing market while maintaining its number two position in the delivery market. In August, Uber had a 68% market share in ride hailing compared with Lyft's nearly 32%. On the delivery front, Uber had a 26% market share versus DoorDash's 57% and Grubhub's diminishing 16%.

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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.

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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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Contact Your Editor
 
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.

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.