Weekly Wrap: The Stock Picks of Top Managers, Where the Dividends Are, and 2021 in Review

Stock Picks of Top Managers

Stock ideas can come from a lot of different places. One place I like to look for them: among the portfolios of some of Morningstar's favorite stock-pickers. In fact, Morningstar tracks the portfolios of 26 highly regarded investment managers--whom we dub Our Ultimate Stock-Pickers--and shares the top holdings, buys, and sells of these investors each quarter. We published our latest installment this week.

What did we find? Last quarter, 12 of our Ultimate Stock-Pickers bought shares of Alphabet GOOG, while 10 picked up Meta Platforms (or the company formerly known as Facebook) FB. And six managers picked up shares of Mastercard MA, UnitedHealth Group UNH, Bank of America BAC, and Nike NKE.

Of those names, we think Meta Platforms is the most attractive today. It earns a wide Morningstar Economic Moat Rating and trades about 20% below our $404 fair value estimate as of this writing. "As users of Facebook and Instagram continue to grow, admittedly at decelerating rates, we expect advertisers will keep coming," says senior analyst Ali Mogharabi. "We also expect e-commerce to drive further top-line growth."

What stocks did our Ultimate Stock-Pickers trim? You'll have to read the article to find out.

The One Portfolio Move You Probably Need to Make

Add bitcoin? Short Tesla TSLA? Buy Ark Innovation ETF ARKK? None of the above. The one move you probably need to make is to rebalance your portfolio. And here's why.

My colleague, portfolio strategist Amy Arnott, ran the numbers and found that a standard 60% stock/40% bond portfolio that hasn't been rebalanced in five years is more like a 72.5% stock/27.5% bond portfolio today. But rebalancing isn't just a task for those who own bonds. Arnott also discovered that an untouched portfolio's international to U.S. stock balance is off-kilter, as are its growth and value exposures.

Arnott reminds us that rebalancing is mostly about risk control, not necessarily improving returns, given that market trends can persist for quite a while. But trends don't last forever--they revert to the mean eventually. "One of the virtues of rebalancing is to avoid getting caught flat-footed when market trends eventually reverse course," she concludes.

So, take the time to readjust your asset mix and subasset mixes either before year's end or shortly into the new year. And if you find yourself in need of some additional fixed-income or international-stock exposure, my Our Picks column this week highlights some fine core bond and international-stock funds and exchange-traded funds to consider.

Where the Dividends Are

This week, we launched a new video series called "Dividend-Stock Deep Dive." Morningstar DividendInvestor editor David Harrell talks with our analysts about dividend opportunities in particular industries, examines the dividend safety of popular stocks, or discusses some of the top undervalued dividend stocks today.

In our inaugural segment, Harrell sits down with Damien Conover, the longtime leader of Morningstar's healthcare research team, to talk about why drugmakers have experienced stunningly consistent dividend growth, whether that growth can persist, and which companies are best positioned to continue to throw off attractive income. One of Conover's top picks in the industry for dividend-seekers is Roche. Listen in on the conversation for more picks and insights.

Stock of the Week: Intel

Intel INTC, the world's largest chipmaker announced plans to publicly list Mobileye, its automotive unit, in 2022. Some reports suggest that Mobileye could fetch as much as $50 billion in an IPO; Intel acquired the leader in advanced driver-assistance solutions, or ADAS, for $15.3 billion four years ago. Intel will maintain majority ownership.

What do our analysts think of the idea?

"Although we think Mobileye has rosy growth prospects, we think this capital allocation decision to unlock value via an IPO for the ADAS leader is a wise move for Intel as it will allow them to focus more on its core chip design and manufacturing business as well as its foundry aspirations," says Morningstar strategist Abhinav Davuluri.

The stock rallied after the news broke, but we think shares have more room to run: Intel still trades below our $65 fair value estimate as of this writing.

Recapping 2021 and Looking Ahead to 2022

December is a time for egg nog, holiday movies, and year-end recaps. At Morningstar, we're doing our part--at least when it comes to the recap part. (I have personally done my part, too, by sipping egg nog while watching Elf.) Just this week, our analysts and specialists talked about how tax-efficient ETFs have been in 2021, which large-growth managers have outperformed this year, and portfolio lessons from 2021. And Mark Miller, a terrific freelance contributor to Morningstar.com who focuses on retirement-related issues, takes a look at what he thinks retirees could expect in 2022. And you can expect more recaps and forecasts to come from us as 2021 winds down.

--Susan Dziubinski

Editor's Picks

You Probably Need to Rebalance If it's been a while since you looked at your portfolio weightings, it might be time to adjust.

What's Inside the 4 Largest Clean Energy ETFs There's much more to these funds than meets the eye.

What Role Should Bitcoin Play in Your Portfolio? And how does it match up against gold?

Portfolio Lessons From 2021 Key takeaways about inflation, asset allocation, and more.

Why Apple's Shares Aren't Appealing Morningstar's analyst says competition and short product cycles limit the company's advantage.

As Supreme Court Weighs Abortion, Expect Shareholders to Push Companies to Strengthen Reproductive Healthcare Some investors are tying reproductive health benefits to an employer's attractiveness.

Portfolio Planning and Personal Finance With Christine Benz

Contemplating Retirement Income? Start Here Nonportfolio strategies can deliver have a big payoff for retirees' plans.

A Year-End Portfolio Review in 7 Easy Steps Check up on your portfolio's health--and that of your whole plan--as the year winds down.

Mutual Funds and Exchange-Traded Funds

How Tax-Efficient Have ETFs Been in 2021? You might be seeing distributions.

4 Funds With Outsize Stakes in Junk Bonds A peek under the hood at several funds with elevated stakes in below-investment-grade debt.

Top Funds for Rebalancing for 2022 Given the U.S. stock market's performance, investors may need to reconsider their asset allocations. These excellent mutual funds and ETFs can help fill in the gaps.

Black Friday Turns November Into a Cruel Month for Trend Followers A rough Thanksgiving weekend shows these investment strategies don't always zig when the market zags, as many expect.

Stocks

What the Great Resignation Does and Doesn't Mean for Economic Recovery In this labor market update, we outline how we expect the factors contributing to the unusually high number of job openings to fade over the next year.

Animal Healthcare Is Barking Up the Right Tree Idexx and Zoetis have profited from pandemic pets, but their valuations remain high.

Dividend-Stock Deep Dive: Drugmakers Morningstar's sector director discusses dividend growth and our favorite dividend payers in the industry.

What Retirees Could Expect in 2022 The unique challenges posed by inflation will be the top story in the year ahead.

We're Closer to the Bulls Than the Bears on Long-Term Oil Demand Reports of the death of oil have been greatly exaggerated.

California Utilities Are Worth Another Look Our top pick among the state's utilities offers a strong combination of value, growth, and yield.

When Will Supply Chains Recover? Some stock sectors offer clearer timelines than others.

Rekenthaler Report

Asset Allocation for Retirees: What Will the Future Bring? The case for a balanced portfolio.

The Supreme Court Considers Defined-Contribution Plans Will the industry's evolution accelerate?

Advisor Insights How Biden's Tax Proposals Could Affect You What to do now, and what to prepare for. The Secure Act, RMDs, and Beneficiaries: Another Wrinkle Here's what you need to know if you are a current holder of inherited benefits. 10 Financial Do's and Don'ts for Super Accumulators Having substantial wealth is not a reason to skip retirement planning.

The Long View Podcast

Dan Egan: Noisy Successes and Silent Failures The behavioral finance expert discusses the current investing landscape, his thoughts on what works in financial education, and the benefits of having dedicated accounts.

Sustainability Matters

Here's One Way Shareholders Can Get Companies to Act on Global Warming Remember 'say on pay'? Tie compensation to emissions cuts, suggests Sustainalytics' Jackie Cook.

Commentary

Are You Living Your 'Rich Life?' Ramit Sethi, author of the best-selling book 'I Will Teach You to Be Rich,' explores the question.

This Year's Outperforming Large-Growth Fund Managers Few funds have been able to beat their benchmark as high-flying companies like Tesla drive benchmarks.

Bubble or Boom? Rob Arnott and Cathie Wood Share Perspectives on Equity A debate on Tesla, disruption, and reversion to the mean.

Rondure Global Advisors Takes on the World 'For women to be represented and have visibility in this industry is a success.'

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