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  1. A Good Month for Quality Job Growth

    Video Reports

    Fri, 1 Aug 2014

    Morningstar's Bob Johnson sees the addition of jobs in the higher-paying sectors and a stable hours-worked metric as good signs for the labor market.

  2. Friday Five: A Balanced View on Twitter, a Long View on Yum

    Video Reports

    Fri, 1 Aug 2014

    This week we raised our fair value for Twitter, maintained our fair value for Yum Brands in the wake of bad news, and sized up T-Mobile's newest suitor.

    yum brands found at 1:29

    looking for that exposure. Stipp: Not having such a great week was [TICKER:YUM] Yum Brands . Their stock took a hit after management said that problems with a food supplier in China are going to affect sales. So,
  3. Paying Dividends Is a Priority for This Payroll Firm

    Video Reports

    Fri, 1 Aug 2014

    Paychex is one of a few firms with both an abundant capacity to pay a big dividend and a strong willingness to do so, says Morningstar's Josh Peters.

    interest rates found at 4:50, 5:29

    with that business as well. Glaser: One of the big worries for dividend investors has been, "How are these stocks going to perform in a rising-rate environment?" When you look at Paychex, what is your take on what could happen if rates begin to move up? Peters: Here's another instance where Paychex is such an ideal pick for many dividend investors . If the economy really takes off, utilities, REITs [Real Estate Investment Trusts], and consumer staples firms are not going to grow that much faster. But if the economy is doing a lot better and interest rates go up as a result, then these stocks see a lot of valuation pressure. At least that's the conventional wisdom. It doesn't
    earn, right now, almost no interest income on that flow. If short-term interest rates start to move up, then it's going to have a direct impact on their earnings. Their earnings will go up just because interest rates have gone up. So, you've got some pent-up earning power there that they should be able to realize over the next couple of years, if short-term rates ever start to move up off the floor. That's not something you'd expect to find in other companies. Typically, a lot of those higher-yielding stocks don't have the economic upside, and they have valuation sensitivity to higher interest rates . And they themselves might be refinancing shorter-term borrowings at higher interest rates . So, it's not just the discount rate that goes up; their income might also go down. Paychex--which has no debt and lots
  4. A Narrow-Moat Retailer at a Bargain-Basement Price

    Video Reports

    Fri, 1 Aug 2014

    The recent decline in same-store sales growth at TJX is being driven by temporary weather trends and not an erosion of the firm's moat.

    filene's basement found at 1:19

    have failed where they have been succeeding--we have seen both Syms and Filene's Basement file for bankruptcy. Recently, the stock has traded down off of its highs because their same-store sales growth has started to decelerate. Investors have panicked and have started to doubt TJX's moat; they think that competitors are moving into the space. We disagree and think that [the deceleration in their same-store sales growth] has been due to weather issues, not to competitive issues. We expect them to maintain mid-single-digit revenue growth through new store openings and also through comparable sales . With the stock trading at a 20% discount to our fair value estimate of $67, we think it's very attractive right now.
  5. Johnson: Expect Steady, But Unspectacular Jobs Growth

    Video Reports

    Thu, 31 Jul 2014

    With economic growth stuck at 2%, jobs growth in July will likely slow from June's upbeat number to something closer to the 12-month average, says Morningstar's Bob Johnson.

    great performance found at 5:10

    the second half of last year, so there was some slowing. The housing market came in a little bit. Now, if you go by category, the biggest thing was consumer spending, as always. And it was mainly focused on durable goods like cars. It really drove the great performance in the second quarter. Besides consumption, the other big contributor to the GDP growth rate of 4% was an inventory swing, which
  6. Why Twitter Can't Be Facebook

    Video Reports

    Thu, 31 Jul 2014

    With lower user time spent on its platform and user data collected, Twitter's ad revenue has constraints versus Facebook, and investors should moderate their expectations.

    advertising platform found at 0:32

    are soaring after better-than-expected second-quarter results. I'm here with Rick Summer, an equity strategist at Morningstar, for his take. Rick, thanks for joining me this morning. Rick Summer: Sure thing. Glaser: Twitter's results seem to have surprised the market. What looked so good in this quarter? Summer: I think there are two primary things. Number one, we did see an acceleration in MAUs, or monthly average users, and that's really key to becoming a mass market advertising platform . Secondly, we also saw some engagement numbers, but more importantly from my perspective, ad revenues per monthly average user continue to creep
  7. Visa's Growth Story Is Not Broken

    Video Reports

    Thu, 31 Jul 2014

    Recent decelerating revenue growth has disappointed investors but is a temporary phenomenon, says Morningstar StockInvestor editor Matt Coffina.

    economic growth found at 2:00

    expenditures globally. They are almost guaranteed to grow revenue faster than overall GDP growth as long as they don't get disrupted by some kind of new payment technology. I definitely don't think that's the case currently. It's not some new payment technology that's causing the trouble. Rather, it's slower-than-anticipated overall economic growth . And in particular, Visa is seeing slower cross-border transactions. They generate extra fees when people from one country use their debit and credit cards in a different country, and those have slowed down very considerably this quarter and in recent quarters. I would attribute that, as you mentioned, mostly to geopolitical tension. They are seeing that, for example, in Argentina, Venezuela, the Middle East , Ukraine, and Russia--pretty much exactly where you would expect fewer people to be travelling internationally, and that's what is weighing on them
  8. Solid Options Still Remain in High-Yield Market

    Video Reports

    Thu, 31 Jul 2014

    Despite muted expectations for the high-yield space, Morningstar analyst Sumit Desai identifies two solid funds for investors seeking exposure.

    fixed income investors found at 0:10

    this space has shown a higher correlation to equities, but recently many fixed income investors have been looking to the high-yield space for higher yields and income. Over the past 12 months, over $18 billion has flown
  9. 2 Wide-Moat Companies That Deliver the Goods

    Video Reports

    Thu, 31 Jul 2014

    With over a million products stocked, these firms enjoy long-lasting competitive positions through cost advantages and the network effect.

    network effect found at 1:06

    cost-efficient than their 150,000 suppliers. The second moat source comes from a network effect . As they become larger, many customers have realized that they don't need a procurement department and that it's far more efficient to
  10. 3 Fund Ideas for a Tax-Efficient Portfolio

    Video Reports

    Thu, 31 Jul 2014

    Index funds aren't the only vehicles suitable for taxable accounts, and Morningstar's Russ Kinnel offers three names that can help minimize the tax hit.

    taxable accounts found at 0:12, 1:35, 2:33

    control, and one of those factors is putting tax-efficient investments in their taxable accounts . Joining me to share some ideas is Russ Kinnel. He's director of manager research for Morningstar. Russ, thank you so much for being here. Russ Kinnel: Good to be here. Benz: Russ, the no-brainer holdings if you have taxable accounts are broad-market index funds. Let's talk about why index funds can be such a good choice for the equity holdings within your
    going on. So, you have low turnover, and that leads to low capital gains . Many of the better index-fund managers, such as Vanguard, can also manage capital gains in a way that reduces that hit, as well. For instance, they can choose to sell the highest-cost lots and do some tax harvesting, even while staying consistent with the index. Benz: And broad equity market exchange-traded funds would also have those same benefits? Kinnel: Exactly. It doesn't really matter too much whether it's an open-end fund or an ETF, just as long as it's a well-run broad fund. Benz: Stepping away from index funds, which you say are a really solid choice for taxable accounts , you brought a couple of other ideas that you think would also work well within investors' taxable accounts . One is a [TICKER:VTMFX] fund, Vanguard Tax-Managed Balanced. It's explicitly managed to keep taxes down. Let's talk about what that fund is and how it works and how it does reduce tax efficiency . Kinnel: Right. It's an interesting mix. It's kind of unusual. You don't have a lot of balanced funds that include munis, but
    fund that you like, that you think investors might consider for their taxable accounts , is [TICKER:OIEIX] JPMorgan Equity Income. Let's talk about why you think that could also work reasonably well if investors are looking for tax-efficient taxable holdings? Kinnel: As you say, dividends do have some appeal in terms of being on par with capital gains . Benz: The tax treatment is currently the same. Kinnel: Right. And what I also like is that the manager, Clare Hart, has a very good record.
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