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Morningstar
ETF Specialist

A Better Mousetrap for Evaluating ETFs

Take a sneak peek at our new and improved ETF research.

Jeffrey Ptak

If you've read any of our recent pieces on ETFs, you might have noticed that our research has evolved a bit.

No, we're not less-fervent believers in attributes like low costs, portfolio diversification, and tax efficiency--those traits remain vital as ever when considering an ETF as a portfolio building block. But we're expanding our coverage to evaluate equity ETFs based on the fundamental attractiveness of the stocks they hold. In that way, we can better address if a stock ETF is cheap, dear, or reasonably priced and, in turn, help you capitalize on compelling investment opportunities as they arise. (For a walk-through of this approach, see our piece "Beating the Market with ETFs.")

We've already shared aspects of this approach with you. For instance, in "We See a 14% Return in the S&P 500's Future," we used our equity research--which spans more than 2,000 stocks--to place a fair value estimate on the SPDRs Trust. And in "ETFs on Our Buy List" we ticked off our short list of some of the most attractively priced equity ETFs that we cover.

Now we'd like to give you a sneak peek at our forthcoming, retooled ETF research. What's new? These analyses set forth information about the quality, risk, and valuation of an ETF's portfolio. From that, you should be able to glean insights into an ETF's intrinsic worth, the risk it courts, and whether it's fairly valued. To that end, here are illustrative analyses for 10 or so of the largest ETFs around:

(* For further details on this ETF, see our recent video spotlight entitled "The Best ETF for 2018.")

In reviewing these analyses, bear in mind that these aren't the new and improved ETF analyst reports themselves. Those reports--which we plan to launch in mid-February--will include a valuation rating ("undervalued," "fairly valued," or "overvalued") based on the attractiveness of the equity ETF concerned. They'll also set forth our estimate of a stock ETF's intrinsic worth, "consider buy" and "consider sell" prices, as well as our forecast of an ETF's expected return, hurdle rate, and excess return, along with stats on the quality and risk of the fund's portfolio. We'll share further details on these and other features of the new analyst reports when we launch them in a few weeks.

In the meantime, we hope you find this sneak peek useful.

Coming soon! The 2008 Edition of
Morningstar ETFs 150
Our newest annual guide features Morningstar's signature full-page report, including our exclusive Morningstar Rating and price/fair value measure, to help you easily determine which ETFs are undervalued and which are overvalued. Additionally, the book features many articles on ETF basics, mistakes to avoid, portfolio integration strategies, and much more, which enable you to take full advantage of these popular investment vehicles. Publishes in late January 2008. Learn more.
  $35.00 - Free S&H  
   

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