Morningstar Review

Introduction: What is an Investment Research & Analysis Site?

Feel free to skip this section if you're already familiar with research and analysis sites, this is a beginner's introduction.

Since the tech boom of the 90's, investing research and analysis sites have exploded in popularity. The first sites provided current stock price, some basic charts and the most recent news. Today's sites have come a long way, most provide every tool you can imagine, from strategy simulation to in-depth portfolio review.

Regardless of the strategy you choose, if you're going to manage your own portfolio you will need access to a research and analysis site. Why? Only about 20% of professional money managers and analysts beat the average market return. Unless you're implementing a passive strategy like Index Investing, you will need to master your strategy, stay abreast of economic and market conditions that impact your portfolio, and constantly perform in-depth research and analysis to uncover your next great investment. High-quality research and analysis sites allow you to do all of that in one place.

“What if I receive third party advice such as a monthly investing newsletter like ETF World Investor or an investing publication like the Wall Street Journal?”

There is a wide selection of high quality and inexpensive investing advice available today from some of the world's best investors thanks to the internet. However, we still recommend that you use a research and analysis site to at least validate the advice that you're getting, never trust anyone's advice blindly. You can quickly learn enough about a strategy to be able to, at a minimum, validate that your advisor's recommendations adhere to the basic principles of the strategy they claim to follow

If your end-goal is a completely self-directed portfolio you will be much more competitive if you master the tools available at one of the better research and investing sites. If we give one experienced investor a company's annual financial statement and give another experienced investor access to a site like Morningstar the results are predictable. Not only can the 2nd investor review the same financials available to the 1st investor, he can review all of the company's current and historical fundamental, statistical and technical measures at the click of a button. He can also quickly and easily compare the company against top competitors, the industry in general, and relevant indexes. The odds overwhelmingly favor the second investor, he has far more information at his immediate disposal.

Morningstar Charts – Free Service

Morningstar overdelivers in this category. Their base chart compares your stock or fund to its own industry and to the most relevant benchmark over a 10 year period. You won't have to spend time figuring out who the competitors are, how to create a good industry comparison, which index to compare to, or how to set up the chart, the default chart does all of this for you. This quick comparison is loaded with information. In the chart below you can quickly determine that Janus Contrarian outperforms its index and industry and is worthy of more research. For those that prefer data, every chart also comes with a performance history table that puts numbers to the chart and adds a few nice perks such as % rank in category and total returns.

Morningstar Quotes – Free & Premium Versions Available

Why use Morningstar for pulling simple quotes, this is pretty standard information, right? We thought so to… until we pulled a quote. Wow! The quality and depth of information was astonishing. You couldn't compile this much research at most sites even if you worked the entire day, and it all pops up instantly. Every section is well labeled and intelligently organized so that you don't get lost in the data. This is a great perk for self-directed investors. No other site makes it this easy to pull so much information.

The snapshot shows you a chart of performance so that you can quickly gauge if the stock or fund has outperformed its peers and a relevant index over the last three years. You can also see some of the key stats to get a feel for the type and size of company or fund that you're reviewing. In the Premium section, we can see Morningstar's rating, their buy and sell value estimates, a snippet from and link to their analyst report, and how strong the competitive advantage (economic moat). Below that you see the typical fundamental and statistical ratios you'll see at most sites but Morningstar provides the benefit of industry and index comparison.

Portfolio Tracking – Free Service

Every investing research and analysis site offers some version of a portfolio tracking tool but Morningstar stands head and shoulders above in this category. Several sites have a similar setup so the portfolio setup screen below may look familiar but two things set this site apart. First, portfolio analysis is Morningstar's specialty, some of their cutting edge tools, such as My Performance Tracker and Portfolio X-Ray, can't be found anywhere else. Second is the number of criteria you have to choose from, how well they are organized, and how clearly they are defined.

The screen shot below is from the Portfolio Tracking setup screen. You can select from hundreds of different variables and you are allowed to add up to 35 variables to your personal portfolio view. You can also store multiple customized views if, for example, you need one for valuation and one for performance tracking. Too complicated? Don't worry, Morningstar also offers several popular prebuilt views if you don't want to customize.

My Performance Tracker – Free Service

This is a service that we hope will catch on quickly. Sadly, most Online Brokerages don't offer this feature yet but they should.

The performance tracker tracks and charts your performance against whatever index you choose. You can see the total return for the investments you are holding, your personal return and the index return. Raw-data oriented investors are provided with a trailing returns table below the chart. Both sections allow you to drill down to individual holdings level detail as well. We were amazed that this was a free feature, most investors do this manually today since it's not offered at most online brokerages so this is a great time-saving perk.

Top Stories – Free Service

Morningstar is a little weak in the news category if you're looking for breaking news, market conditions or recent economic activity. While they don't provide a lot of timely market analysis, they offer a lot of great educational and investment idea articles that you won't see browsing the CNN headlines or your online Brokerage's news page.

Morningstar Market Snapshot – Free Service

Morningstar has developed a unique tool for examining which stocks are currently driving the US Stock Market. The screen shot below is a snapshot of the Morningstar Index matrix tool. The color codes designate performance Vs the market. Along the horizontal axis you can view Value, Core and Growth stock performance and along the vertical axis you can view Large, Mid and Small Cap performance. The body of the chart makes up any combination of the six metrics.

We've never seen anything quite like this before, it's a radical and creative way to explore which stocks are driving the market. Unfortunately you can only view the current day, you are limited to the US market, and there is only one version available. If Morningstar develops more flexible parameters so that you can view longer periods of time and throw some global indexes into the mix, this will be another industry first and industry leading feature. For now, it's a fun and unique way to slice and dice the market but the tool doesn't provide much value in terms of practical application.

ETF Screener – Free Service

The ETF screener is the least impressive of Morningstar's Screening tools but it's still better than most competitors and it's FREE. There were 742 ETFs in the database during our review, and that has to be most, if not all, ETFs on the market today. This tool doesn't offer near as many parameters to choose from as the premium screening tools, but you can usually narrow your search down to a manageably small list of ETF prospects.

After you hit the View Results button, the Morningstar horsepower finally kicks in for ETFs. You can choose from five different views in the results page; Snapshot, Performance, Risk & Tax Data, Portfolio and Nuts & Bolts. You can then rank based on any criteria on any of the five screens and you can also click on your favorite ETFs to pull up more detailed information, some of which requires a Premium Membership.

We were impressed with the detailed analysis already available at Morningstar since ETFs are a relatively new investing vehicle. Demand for research tools will grow exponentially over the next few years since ETFs are beginning to move away from simple index tracking strategies. Based on what's already available, it appears that Morningstar will offer robust tools to meet the growing demand.

Stock & Mutual Fund Screeners – Free and Premium versions available.

The free versions of the Stock and Fund Screeners are better than those offered by most online brokerages but Morningstar's Premium Stock and Fund Screeners are the best in the industry. The Premium Stock screener has over 400 variables to choose from and the Premium Fund Screener has over 300. We were also amazed by the customization options and how easy the tools are to use, not an easy task when you incorporate so much flexibility. Almost all of the criteria are selected from intuitive dropdowns, and those that aren't provide a pop-up guide to give you a range of values.

Prebuilt Query Screens – Premium Only

For beginners, even simple screening tools can be confusing. There is no better way to learn than to review a few high-quality prebuilt screens before creating your own. Morningstar provides a wide variety of screens based on many popular long- and short-term strategies. You simply select the screen that sounds interesting to you and it will automatically populate the criteria. If you like, you can then modify the pre-built screen by adding your own additional criteria to narrow down the list of results.

Warren Buffet Stocks is a fun example. This pre-built screen pulls “companies with strong competitive advantages–or what Buffet calls economic moats. Here, we look for companies that our analysts classify as having either a wide or narrow economic moat. Like Buffett, we also look for companies with positive free cash flows and good returns on capital.” This screen provided a list of 438 stocks. We then incorporated a few criteria from the Bargain Stocks pre-built screen to narrow our list down to 15 high-potential investments.

Portfolio X-Ray – Premium Service

It's hard to know where to begin or what to include about Morningstar's Portfolio X-Ray feature, nothing we can say here is going to do this tool justice, it's Morningstar's crown jewel. Some of the online brokerages threw in the towel and decided to just hire to provide investing tools to their clients rather than develop their own when they saw this tool.

While some of the features within X-Ray are a bit complex, Morningstar provides great education material and tutorials and all of them are intelligently placed, you won't have any trouble finding help when and where you need it. The screen shot below is only one of several screens you will see when you put your portfolio through the X-Ray tool. Our sample screen shot is from the asset allocation and diversification mix page. Each section contains a percentage breakdown and, other than the asset allocation box, a comparison to a relevant index. You will also see some commentary about your portfolio's risk and the investor profile to see if your portfolio's risk and growth potential are in line with your expectations and objectives.

X-Ray of Global Exposure – Premium Only

The Global Exposure portion of Portfolio X-Ray is a good way to analyze how you are diversified globally. The chart is what makes this a more powerful approach than you will see at other sites. When you get familiar with the report's layout, you can tell how your portfolio is weighted globally at a glance.

Aggressive investors with a long time horizon will find this tool's recommendations to be overly conservative. Morningstar's philosophy comes through in this tool more than in any other. This is probably because Morningstar pushes investors toward value investing, index investing and other long-term strategies. While this means their recommendations will tend to be a bit conservative, we liked that many of the tools were focused as much on capital preservation and risk management as on capital appreciation.

Portfolio Intersect – Premium Only

The Stock Intersection is the last stop in the portfolio X-Ray. By the time you reach this page, you're pretty mentally exhausted if you tried to absorb it all in one sitting but you've learned a lot about your portfolio.

While this isn't the most useful tool for stock investors since they can simply divide a stock holding by the total portfolio to find the weight, the Stock Intersection is essential for mutual fund investors. This tool can be used by mutual funds to determine how much of a particular stock, bond or other asset they own across all mutual funds. In the example below, you can see that in addition to our Microsoft common stock holding, we owned another 0.41% in the S&P 500 ETF fund.


Two questions we hear frequently at is “can I compete with professional money managers?” and “Will I have access to comparable tools?”. The answer is yes to both. If you are a client at one of the top investing sites like Morningstar, TD Ameritrade or Fidelity, you will have access to tools that are every bit as powerful as any available to the professionals. If you work hard enough to master a strategy, you can definitely outperform most professional investors. Professional money managers have performance constraints, they make a living charging expenses and fees which reduce their returns. They are also legally obligated to follow whatever investing guidelines and strategy they advertise to attract investors, which means they have less flexibility to adapt to changing market and economic conditions.

We hope you enjoyed this Morningstar Review, we certainly enjoyed exploring their site. They have outstanding tools for all strategies and all types of investors, and most are relatively easy to use. Are there any drawbacks? Of course, no site is perfect. If you're not a premium customer, the pop-ups are annoying. Most are advertisements, and it's understandable that they'd want to promote their own products, but hopefully they'll eventually tone down the ads or at least reduce the frequency. That being said, is currently the industry leader in the research and analysis site category. All in all, you won't find a better investing site, especially if you sign up for the premium services.

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1 Comment

  1. I am approaching 70 and have a modest traditional IRA. I have it set up in Tdameritrade with my wife being using advice by Suzy Ormandy. This has not been doing well. A Tdameritrade broker wants to get me into a Morningstar managed account based on my investment comfort level. Would you recommend this move for myself?

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