Stock Technical Analysis

I receive emails from Morningstar. This company provides statistics and analysis of just about every publicly traded stock company you can think of as well as voluminous information on mutual funds around the world.

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You can ask them about a company’s sales, management, marketing plan, their performance within a corporate sector, ratios of all kinds, etc, etc. The have it. After you have gleaned all these facts and analyzed them there is still one unanswered question. If I buy this equity will it go up? You definitely will not get that answer and that is the only answer that means anything. It is the bottom line for all research.

Brokers and financial planners use this type of service to determine if a stock or fund is a “good” buy. When it comes right down to it you must ask, “If I can get this information then so can everyone else so why is it any good?” It isn’t. After you have been doing this a few years you will find that it is a useless exercise. Brokerage firms want you to do it so that if the stock goes down they can say to you that it was your decision to buy it based on all those “facts”. Yes, you had all that information, but it is nothing more than disinformation.

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They tell you that every conservative investor does his homework, his research. The term conservative investor is an oxymoron, like military intelligence or honest politician. There is no such thing as a conservative investment if there is the slightest possibility that you could lose all or part of your money. And that is true in just about everything whether it is stocks, bonds, real estate, collectibles, you name it.

Their ad stated that every month they would have information on the best and most popular mutual funds. Since when has popularity got anything to do with a stock or a fund going up? Fidelity Magellan is one of the most popular mutual funds in the world yet it dropped from $145 to $73 (a 50% loss) and is now trading at $100 still down 31%. Janus Balanced Fund dropped from $25 to $17.50 and has since rallied to $20. TR Price Japan Fund hit a high of $16, fell to $5 and is now $8 still a 50% loss. Did any of their “information” ever tell you to sell? Popularity is not a yardstick for profits.

And they also will give you the hot picks of 150 analysts. You might as well use a dartboard as listen to those guys. They are high priced guessers who put you in and never get you out when something starts down. Morningstar is providing you with information. The information is not worth the paper it is written on.

Their facts are useless even though they are facts. Bottom line: research is worthless.

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  5. We’d like to share with you our latest performance statistics, which showcase the value of Morningstar’s independent and fundamental, bottom-up research. We apply a consistent research methodology that relies on in-depth company and industry insight and proprietary valuation models. Instead of predicting short-term price movements or momentum, our analysts focus on determining the value of a business, its risks, and whether the stock price accurately reflects both.

    The Morningstar® Wide Moat Focus Index is comprised of the 20 wide moat stocks—those companies with sustainable competitive advantages—with the most attractive valuations as measured by the Morningstar price/fair value ratio. The Morningstar Wide Moat Focus Index has handily outperformed the S&P 500 Index, in the trailing one-, three-, and five-year periods on an annualized percentage return basis. In the past year alone, the index has outperformed the S&P 500 Index by 16.21 percentage points.

    Within one of our flagship monthly newsletters, Morningstar® StockInvestor™, Editor Paul Larson manages the publication’s two real-money, market-beating model portfolios—the Tortoise and the Hare. We have two goals for these portfolios: to outperform the S&P 500 Index and to generate positive returns regardless of the broad market environment.

    Versus the S&P 500 Index, the Morningstar Hare Portfolio has outperformed in the trailing one-, three-, and five-year periods on an annualized percentage return basis. The Morningstar Tortoise Portfolio has outperformed the S&P 500 Index for the trailing three- and five-year periods.

    As of Sept. 30, 2009, there were 56 stocks with a 5-star Morningstar Rating, which is calculated by comparing a stock’s current market price with Morningstar’s estimate of the stock’s fair value. In the trailing one-, three-, and five-year periods, Morningstar’s 5-star-rated stocks have outperformed the S&P 500 Index on an annualized percentage return basis. Stocks assigned 4-star ratings also outperformed the S&P 500 Index in the same periods.

    We also publish a quarterly column about our portfolio performance on our Web site for individual investors, Morningstar.com. Our latest article is available at http://news.morningstar.com/articlenet/article.aspx?id=304491&page=%252fstockratingperformance.

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