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
Roundup 9/11/20 -- A Strong Quarter for Oracle and a Fair Value Increase for Visa

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 Enterprise Products Partners EPD, Oracle ORCL, and Visa V.

Best wishes,

David Harrell,
Editor, Morningstar StockInvestor

Enterprise Cancels Midland-to-ECHO Pipeline
by Stephen Ellis | Morningstar Research Services LLC | 09-09-20

Enterprise announced that it has canceled its Midland-to-ECHO 4 pipeline, as it was able to amend its existing customers' agreements to use in-service pipelines to meet its needs. Broadly, we see the cancelation as an indicator that Permian oil production growth (the pipeline was expected to move 450,000 bpd initially) over the next few years will be significantly less than expectations at the end of 2019, which is not surprising given the COVID-19 impact. Enterprise will take an immaterial $45 million charge in the third quarter. Its growth capital spending plans for 2021 and 2022 decline to $1.6 billion and $900 million from earlier guidance of $2.3 billion and $1 billion, respectively. After updating our model for the lower capital spending and earnings impact, our $25.50 fair value estimate and wide moat ratings are unchanged. Our EBITDA expectations already assumed flat earnings from 2020-22, given the difficult market and challenges around new growth projects. With the lower capital spending, we expect between $600 million and $900 million in excess cash in 2021 and 2022, and we think reducing leverage and prioritizing buybacks are high on the list.

We continue to think Enterprise remains deeply undervalued, and its 10% yield should be enticing for income investors. We see no risk of the distribution being reduced, given its 1.6 times coverage ratio and substantial excess cash generation (cash remaining after funding the distribution and capital spending) over the next few years. Liquidity and leverage are also not a concern given the partnership's $7.3 billion in liquidity in the second quarter, and leverage is at 3.4 times and declining. The diversity and scale of the partnership's operations across oil, natural gas liquids, gas, and petrochemicals ensures it will be able to pivot accordingly as the market recovers to maximize new earnings opportunities.

Oracle Delivers Solid Results With Growing Demand for Cloud ERP Applications
by Julie Bhusal Sharma | Morningstar Research Services LLC | 09-10-20

Oracle reported strong first-quarter fiscal 2021 results, as revenue surpassed CapIQ consensus estimates and adjusted earnings per share topped the high end of management's guidance. The growth was fueled by accelerated demand from cloud services and license support, which accounted for 74% of the company's total revenue. Despite uncertainty brought on by the coronavirus, management provided a positive outlook for the second quarter, and we believe Oracle will continue to see strong demand from its autonomous database segment and enterprise resource planning, or ERP, solutions. However, due to intense competition in the database management market, we are maintaining our fair value estimate of $50 per share. With shares trading around $59, we would recommend waiting for a pullback before committing capital to the wide-moat name.

Revenue in the first quarter increased 2% year over year to $9.4 billion, compared with a guidance midpoint of $9.2 billion. Cloud services and license support sales were $6.9 billion, representing a 2% increase year over year. Management highlighted healthy demand for the company's fast-growing ERP applications, as revenue from the Fusion ERP segment grew 33%, while NetSuite ERP sales rose 23%. Furthermore, founder Larry Ellison touted strong adoption rates and solid customer satisfaction regarding Oracle's autonomous database and cloud infrastructure offerings. Additionally, adjusted operating margins for the quarter expanded 290 basis points year over year to 45% and non-GAAP earnings per share were $0.93, compared with CapIQ consensus of $0.86.

Guidance for the second quarter includes revenue of $9.8 billion, indicating a 2% increase at the midpoint. Additionally, management expects adjusted earnings per share to be between $0.98 and $1.02. The leadership team did not provide full fiscal year guidance due to limited visibility from the COVID-19 pandemic.

A Fair Value Increase for Visa
by Brett Horn, CFA | Morningstar Research Services LLC | 09-11-20

We are increasing our fair value estimate to $171 from $166 per share, due to time value since our last update. Our fair value estimate equates to 34.3 times projected fiscal 2020 earnings. While growth in the near term will likely reverse into declines due to the economic impact of the coronavirus, we think the ongoing shift toward electronic payments will allow Visa to maintain recent growth rates over the next five years and project gross and net revenue to grow at a 9% and 8% CAGR, respectively. We think that this growth will be increasingly driven by international markets, as emerging markets become a more meaningful engine for the business. While margins on a gross revenue basis have stalled in recent years and will likely be under pressure this year, we think the scalability of the business and more muted client incentive growth will allow for margin improvement going forward, and project operating margins (based on gross revenue) to improve from 53% in fiscal 2019 to 56% by fiscal 2024. Given the company's history of fines and one-time charges, we include ongoing one-time costs roughly in line with historical averages in our projections, but these costs are excluded from the margin levels above. We use a 9% cost of equity.

------------------------------------------------------------

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.

©2020 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.

 
Customer Support
Product Support
Inquiries regarding your subscription such as address changes, missing/damaged issues, etc.
Phone: 1-800-957-6021 | Mon-Fri 8:30AM-5:00PM
Inquiries regarding technical issues such as logging in or downloading
Phone: 1-312-424-4288 | Mon-Fri 8AM-6PM
E-mail: newslettersupport@morningstar.com
Product Sales
Inquiries regarding your subscription renewal, billing or to learn about other Morningstar investment publications and resources
Phone: 1-866-608-9570 | Monday-Friday 8AM-5PM CST
E-mail: newslettersupport@morningstar.com
Contact Your Editor