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Stock Strategist

Stock Star Rating Performance Update--Page 2

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Moat Performance
One of the most frequent requests that I receive after writing these columns each quarter is for an analysis of our rating performance broken down by economic moat, which I've provided in the tables below. The "5-1" columns shows the returns for each moat group within the Buy at 5 Stars, Sell at 1 Star portfolio, while the "coverage (cvg)" columns show the returns for all stocks that we cover within each moat group.

For example, in 2007, the wide-moat stocks in the Buy at 5 Stars, Sell at 1 Star portfolio posted a 7.6% return, while the entire universe of wide-moat stocks that we cover dropped by 7%. That's good, because it means we did well at selecting a group of wide-moat stocks that would outperform the entire universe of wide-moat stocks. However, the no-moat stocks in the Buy at 5 Stars, Sell at 1 Star portfolio dropped by 10.6% in 2007, while the no-moat stocks in our coverage universe posted a positive 0.8% return. That's bad, because it means we steered investors toward no-moat stocks that underperformed the average no-moat stock.

Pat Dorsey does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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