Skip to Content
Investing Specialists

Three Solid Buy Ideas from an Ultimate Stock-Picker Screen

We apply Jensen's approach to stock picking to generate quality buy ideas.

Mentioned: , , , , , , , , ,

By Brett Horn | Associate Director of Equity Research

Aside from sifting through the holdings, purchases, and sales of our top managers, members of The Ultimate Stock-Pickers Team keep tabs on the commentary put forth by these top managers in order to get a better feel for the thinking that went into their buy, sell or hold decisions. As a byproduct of this process, we are able to construct screens based on the methodologies that are utilized by some of our Ultimate Stock-Pickers to hunt for buy and sell ideas. One of the managers we look at regularly is the team at the  Jensen (JENSX) fund, which runs a large-cap stock portfolio that has posted market-beating returns for more than a decade. Because of the fund's strict and transparent investing philosophy, we can screen for stock ideas that not only meet Jensen's strict guidelines, but which can be validated by our own equity research. That is, after all, the core objective of Ultimate Stock-Pickers: to cross-check our stock research against the opinions of professional money managers.

Understanding the Jensen Approach
The portfolio managers at Jensen govern themselves by a very simple and rigorous set of stock-selection criteria. The fund will only invest in companies that have earned at least a 15% return on equity (ROE) in each of the previous 10 years. The main point of this methodology is to limit the fund's holdings to companies that Jensen believes are consistent value creators. In their experience, "when the ROE of a business falls below 15% it likely signals an erosion of competitive edge, and a shift in the landscape within the industry."

The Morningstar Ultimate Stock-Pickers Team does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.