Bond Investors Key In on the Economy
Strong economic data and global stimulus hopes overcame weak corporate earnings in the bond market last week.
The potent brew of stronger economic data in the United States and renewed hope for further central bank stimulus lifted the spirits of the global equity and credit markets last week, only to be dashed on Friday as weak earnings reports weighed on the markets. However, based on the strength earlier in the week, the average credit spread in the Morningstar Corporate Bond Index tightened 10 basis points last week to +133, approaching levels not seen since 2007.
The week brought a slew of positive economic data in the U.S., which emboldened buyers of risky assets to look past weak third-quarter results from companies such as Intel (INTC, AA), Google (GOOG, AA), Coca-Cola (KO, AA-), and IBM (IBM, AA-). Offsetting these marginal reports were bank earnings from J.P. Morgan Chase (JPM, A) and Wells Fargo (WFC, A+) that showed continued improvement in core businesses.
Consumer spending remained strong as seasonally adjusted retail sales rose 1.1% in September from August, firmly beating economists' median forecast of 0.8%. The internals of the report confirmed this strength, as non-auto retail sales were up 1.1% versus a median forecast of 0.7%, while core retail sales (excluding autos, gasoline, and building materials) increased 0.9% compared with the median forecast of 0.4%.
Housing starts for September came in much stronger than anticipated, up 15.0% month over month, running at an annualized rate of 872,000 units. This topped expectations of a 2.7% gain or 770,000 annualized units. Strength was seen in both single-family and multifamily starts, as the housing starts data begin to catch up with the National Association of Home Builders Index, which has been improving in recent months.
Further support for the rally in risk assets came from industrial production (up 0.4% month over month versus forecast of 0.2%), the Philadelphia Fed business index (up 5.7 versus forecast of 1.0), and muted inflation as the core consumer price index rose modestly at 0.15%. The September increase in core CPI was higher than July and August, but the three-month annualized rate is just 1.2%, which is the lowest level since December 2010. With the September data, the year-on-year rate of core inflation is now 2.0%.
The Next Round of Central Bank Actions
In addition to the strong economic data in the U.S., news from China and Spain increased speculation that the next round of central bank monetary stimulus will be launched shortly. In China, consumer price inflation declined to 1.9% in September from 2.0% in August, and producer prices dropped 3.6% from a year earlier. The closely watched third-quarter GDP data showed growth of only 7.4%. This compares to with 7.6% in the second quarter and is the seventh straight quarter of slower growth. Although other data released last week, such as retail sales, suggest that the decline in the GDP growth rate is abating, the market is taking the view that the relatively weak GDP and inflation data open the door for Chinese policymakers to attempt to boost the economy.
In Europe, Moody's reaffirmed its Baa3 sovereign rating on the Kingdom of Spain but assigned the country a negative outlook. Moody's downgrade comes on the heels of S&P's downgrade to BBB- with a negative outlook. As many market participants believed that Moody's would lower the Kingdom's rating to junk status, the reaffirmation spurred a rally in Spanish debt, as the 10-year bond rallied to 5.5% after Moody's announcement, the lowest level since April. With the risk of a near-term downgrade to below investment grade removed, European equity and credit markets rallied as the stage is set for the Spanish government to seek support from the European Central Bank. Moody's expects that Spain will apply for a precautionary line of credit from the European Stability Mechanism, triggering the ECB's Outright Monetary Transactions program to start purchasing short-term Spanish debt in the open market. The timing of this request is uncertain, but we suspect Spanish Prime Minister Mariano Rajoy will await the results of important regional elections in Spain in order to shield his party's popularity from the potential negative backlash of the support request.
As the structural issues remain in Spain and fundamentals in the country continue to deteriorate, we do not believe the longer-term issues have been solved, but we respect the market's response to potential ECB bond purchases.
New Issuance Surges
While we had predicted a low volume of new issuance last week because of quiet periods before companies report earnings, the combination of a strong credit market and buyers' appetite for new paper drove a very active calendar. On Thursday alone, $19 billion of new debt was issued, making it one of the busiest days for new issuance this year. Highlighting the clamor for new debt and capitalizing on the current upswing in the housing market, Lennar (LEN, BB) issued $350 million of 10-year debt at 4.75% or a spread over Treasuries of +293 basis points, which is significantly tighter on a spread basis than the average BB credit. As is often the case, the strong rally in credit coincided with $2.4 billion of inflows into investment-grade bond funds for the week ending Wednesday, according to Lipper.
Looking forward to the coming week, the drivers of the market should continue to be speculation about central bank action, economic data, and third-quarter earnings. In the U.S., we note several important data releases including new home sales and the Federal Open Market Committee's announcement Wednesday, durable goods orders Thursday, and third-quarter GDP on Friday.
November Ballot Measures Could Affect Muni Credits Throughout the Country
Contributed by Rachel Barkley and Candice Lee, Municipal Credit Analysts
In addition to the presidential and regional political elections on the November ballot, voters in many areas will be deciding on ballot measures that could affect the credit quality of state and local governments. Here we highlight measures in four states that may affect area governments. This is not an exhaustive list, but it emphasizes investors' need to remain current on the legal framework when considering investing.
Florida: Amendment 3
Amendment 3 is one of 11 proposed amendments to the state constitution included on Florida's November general election ballot. Commonly referred to as the state revenue limitation amendment, or the "smart cap," the amendment would revise the state's existing revenue limitation from one based on personal income growth to a new formula incorporating inflation and population growth. Any revenue collected in excess of the cap would be required to be deposited into the state's budget stabilization fund until the fund equals 10% of general fund revenue. Additional revenue would then be used to reduce school district property tax rates or be returned to taxpayers. Once in place, this cap would require a supermajority vote of the legislature to be adjusted. The revenue growth limit includes debt service revenue used to pay bonds after the beginning of fiscal 2013.
Morningstar notes that the current financial condition of the state is sound, highlighted by its proactive budgetary management in recent years and maintenance of healthy fund balance levels despite significant revenue volatility. However, if passed, Amendment 3 could constrain the state's financial flexibility. We will monitor the status of this amendment and the state's ability to manage its financial health. If passed, the new revenue cap would not take effect until fiscal 2015, allowing the state time to plan for any potential impact.
Arizona: Proposition 117 and Proposition 204
Proposition 117, a legislatively referred ballot measure, seeks to limit the growth in annual local property valuations. It would cap the annual increase of assessed property value to 5% over the previous year's value, with the aim of preventing spikes in property assessment values that would lead to increased taxes paid by homeowners. Proposition 117 would also eliminate the current two-tier property tax system in Arizona. For taxes levied for debt service and special districts such as fire safety and flood control, properties are assessed at full market value, which can grow without limitation; for the operation and maintenance of cities, counties, and school districts, properties are assessed at a secondary limited property value, which can grow by 10% annually. If passed, Proposition 117 would adversely affect the revenue-raising ability of local governments in Arizona, which have already endured strained budgets as property tax revenue declined after the housing crash.
Via Proposition 204, voters will decide whether to make permanent a statewide sales tax that is estimated to generate roughly $1 billion of revenue in its first year, with the lion's share mandated to fund primary and higher education. The temporary sales tax was originally advocated by Gov. Jan Brewer in Proposition 100 as a means to alleviate the state's ongoing budget deficits. However, the governor opposes making the sales tax permanent, and Secretary of State Ken Bennett even tried to exclude Proposition 204 from the ballot despite it having garnered more than 290,000 signatures. Passage of Proposition 204 would limit the state's financial flexibility, but at the local level would be a boon to school districts and institutions of higher education.
Illinois: Public Pension Amendment
The proposed constitutional amendment in Illinois would require a three fifths majority vote in each governing body of local government, school districts, or pension and retirement systems in order to increase pension benefits. This makes it more difficult for local entities to increase their pension liabilities by granting more pension benefits to retired workers. But given the strained state of pension funding throughout Illinois, we think it's unlikely that local governments would clamor to raise benefits, and therefore costs, anyway. Passage of this amendment would make it constitutionally more difficult for pension liabilities to grow beyond their current rate.
Michigan: Proposal 2 and Proposal 5
Proposal 2 is a voter-initiated constitutional amendment ballot measure that seeks to grant both public and private employees the constitutional right to collective bargaining through labor unions. This would shift power to employees and, at the governmental level, could impose limitations on financial flexibility vis-a-vis wage setting and hiring and firing procedures.
Proposal 5 is another voter-initiated measure that potentially limits the state's revenue-generating capacity. If passed, it will introduce a constitutional amendment that requires a two thirds supermajority vote in both the House and the Senate in order for the state to enact new or additional taxes, expand the tax base, or increase tax rates. Proposal 5 would therefore make it very difficult for the state to address growing expenditure needs through expanded revenue; it would more likely need to make expenditure cuts or otherwise accumulate budget deficits or employ deficit financing, which would both be credit negatives.
New Issue Notes
Despite Downgrade, Hewlett-Packard Bonds Look Attractive (Oct. 19)
Despite cutting Hewlett-Packard's (HPQ) credit rating to BBB+ from A, we continue to believe that HP bonds provide attractive return potential. The new rating reflects the firm's diminished prospects for fiscal 2013 and a more dim view of the firm's long-term competitive position, offset in part by management's continued commitment to rebuilding balance sheet strength.
HP has followed through on its promise to rein in share repurchases and acquisitions under CEO Meg Whitman. Over the three quarters that she has been at the helm, the firm has retained more than half of free cash flow, cutting net debt by $2.5 billion or about 10% of the total. Management has commented that it views a mid-A rating as important to its strategic flexibility over the long term and that it believes cutting net debt, excluding its financing subsidiary, to zero is important in achieving that rating level. We are somewhat concerned that the combination of a low share price and shareholder pressure could prompt increased buyback activity, though our rating factors in our expectation that HP will continue to limit share repurchases and drive toward its leverage goal at least as long as the business remains under pressure.
Competitive and economic pressures have hit across each of HP's core businesses, causing the firm to undertake aggressive restructuring activities while plowing cost savings back into product R&D to bolster its longer-term competitive position. The need to invest heavily in R&D points to the difficult transition that HP faces. Its printer and PC businesses, which generate about 40% of operating income, produce strong cash flow but face secular decline as substitute products cannibalize sales. As a result, we believe HP needs to strengthen its enterprise hardware business, where it already possesses sustainable competitive advantages. Within this segment, servers generate the bulk of revenue, but this market has come under pressure as virtualization lowers customer switching costs. We believe that HP needs to build on its proprietary storage and networking technologies to create holistic solutions to better compete with the likes of Cisco (CSCO, AA) and IBM.
The effort to build the enterprise business, coupled with a tough turnaround effort in the legacy EDS services business, will hurt profitability in fiscal 2013. Management is guiding to $5 billion in free cash flow during the year, suggesting that HP's ability to repair its balance sheet will remain depressed for some time. For comparison, the firm generated $8 billion in free cash flow as recently as fiscal 2011. With $1 billion committed to the dividend and net repurchases likely to still consume another $1 billion or so, we expect that HP will still carry around $16 billion in net debt at the end of fiscal 2013. Given the pressures HP faces, forecasting cash flow beyond 2013 is difficult. Under our base-case scenario, we no longer assume that cash flow bounces back to historical levels and, as a result, we now believe the firm will take several years to hit its leverage target.
While the recent news on HP has been negative, we believe it is important to remember that the firm still possesses considerable financial strength. Consolidated net leverage currently stands at about 1.5 times EBITDA. While this is on the high side for a tech firm, we believe it is reasonable given the fact that the firm has a sizable customer financing portfolio backing a large portion of its debt and that management is committed to reducing leverage over time. In addition, HP's $120 billion top line encompasses a diverse array of businesses and we wouldn't be surprised if the firm sought to rationalize this portfolio. In particular, we believe that the EDS services business should be sold off.
Despite the strengths that HP still possesses, its debt trades like a very weak BBB credit. For example, the firm's 4.65% notes due 2021 trade at a spread of 269 basis points over Treasuries while the BBB- bucket in the Morningstar Industrials Index trades at about 225 basis points over Treasuries. We believe there is far more upside potential in HP bonds than downside risk, as the odds of the firm slipping into junk territory are very low, in our view. We believe the firm would take even more dramatic steps to cut leverage, such as eliminating the dividend, before it let its ratings deteriorate to that level. On the other hand, if HP can effectively stabilize the business over the next couple of years while steadily reducing leverage, a positive re-evaluation of its credit health is likely.
Oracle's Issuance Could Prove Attractive (Oct. 18)
Oracle (ORCL, AA) is planning a benchmark-size offering of 5- and 10-year notes--potentially a great opportunity to invest in a firm that we believe possesses exceptional financial strength. We believe Oracle holds one of the strongest competitive positions in the software industry, thanks to the very high switching costs around its database and middleware products. In addition, we expect the firm will successfully navigate the transition to cloud computing as it offers customers hybrid solutions that mix cloud and on-premise products. Oracle also has plenty of financial flexibility to navigate future technological developments as it carries $31 billion in cash against only $15 billion in debt.
Initial price talk on the 5-year issue is around 50 basis points above Treasuries, significantly wider than spreads on Oracle's existing debt. For example, the firm's 5.75% notes due 2018 trade at about 26 basis points above Treasuries, while its 3.875% notes due 2020 trade at about 51 basis points above Treasuries. If actual spreads on the 5-year notes hold north of 30 basis points, we believe investors would be getting a good deal. For comparison, IBM's 1.25% notes due 2017 currently trade at 23 basis points above Treasuries, and Google's 2.125% notes due 2016 trade at 22 basis points above Treasuries. On the 10-year offering, we would view anything above 60 basis points as very attractive, with IBM's 1.875% notes due 2022 at 35 basis points above Treasuries and Google's 3.625% notes due 2021 at 58 basis points above Treasuries.
Lennar Back in High-Yield Market With $350 Million 10-Year Senior Note Offering (Oct. 18)
After pricing a long 5-year senior note in July at a yield of 4.75%, representing a spread of 404 basis points over Treasuries, Lennar (LEN, BB) is back in the market with a $350 million 10-year offering. Proceeds are for general corporate purposes.
With strong fundamentals emerging in the homebuilding and building product markets--including Oct. 17 news of a sharp increase in housing starts--companies are able to price debt at attractive levels. Several comps now exist across the sector. Split-rated Owens Corning (OC, BBB/UR-) priced a $600 million 10-year deal on Oct. 17 at a spread of 240. Split-rated Toll Brothers (TOL, BBB-) issued 10-year notes earlier this year that are now indicated at a spread of about 270. Junk-rated D.R. Horton's (DHI, BB+) recently issued 10-year bond is trading at a spread of about 257. Junk-rated Masco's (MAS, BB) 10-year bond issued earlier this year is indicated at a spread of about 300. Finally, Lennar's 5-year bond was recently indicated at a spread of 290. Given that we view the comps as somewhat rich--with the exception of Toll--we view fair value on the new 10-year Lennar notes at a spread of about 325, or more broadly at a yield range of 5.0%-5.25%.
Lennar reported very strong third-quarter results last month, in line with recent earnings reports from some of its peers. We continue to view Lennar as one of the best operators in homebuilding. Strong double-digit increases in deliveries (up 28%), new orders (up 44%), and backlog dollar value (up 95%) all support recent strength in the industry. Lennar continues to post market-leading gross margins, which came in at 23.2% this quarter, up 210 basis points. While Lennar and other builders have experienced raw material cost increases, management expects to maintain strong margins based on an ability to selectively raise prices. The firm maintained stable leverage, with net debt/cap coming in at about 48%. Lennar ended the quarter with cash of almost $700 million and an undrawn $525 million credit facility.
Bank of New York Announces New 3- and 5-Year Notes (Oct. 18)
Bank of New York Mellon (BK, A) announced that it plans to issue new 3-year fixed- and floating-rate notes and 5-year fixed-rate notes. The 5-year notes will be a little longer than 5 years and will have a final maturity of January 2018. There is no whisper on price guidance yet.
Bank of New York Mellon's current 5-year trades in the area of 55 basis points above Treasuries, which we think is fairly valued. Unless this deal comes with a significant new issue concession and prices in the area of 75 basis points above Treasuries, we think investors should look to J.P. Morgan's 5-year as an alternative. Although we rate both companies the same, J.P. Morgan's 5-year trades significantly wider, in the area of 90 basis points above Treasuries. Of course, we acknowledge that many market participants are full on the J.P. Morgan name, and for those portfolio managers who need the diversity of the Bank of New York Mellon name, we recommend the Bank of New York bonds all the way down to their fair value of +55.
CSX to Issue Benchmark-Size Long Bonds; Initial Price Talk Sounds Attractive (Oct. 17)
We're hearing that CSX (CSX, BBB+) is in the market with a benchmark-size 31-year bond. Proceeds are expected to be used for general corporate purposes, which probably includes refinancing some 2013 maturities. Although our credit rating on CSX is higher than the NRSROs, we note that Moody's raised its rating one notch to BBB on Wednesday and S&P maintains a positive outlook on its BBB rating.
Within railroads, we maintain an overweight recommendation on CSX and continue to prefer its bonds over those of similarly rated Norfolk Southern (NSC, BBB+), its Eastern competitor. The two have relatively similar leverage profiles and operating ratios wrapped around 70% for the latest 12 months ended June 30. Although credit metrics generally have improved over the course of the year, weak coal volume remains a significant headwind for both names due to low natural gas prices. Highlighting this point, CSX reported third-quarter results Wednesday with coal volume down 16%. However, strong volume gains in intermodal and automotive helped the company achieve an operating ratio on par with the prior year.
CSX has an existing 2042 bond that we recently saw quoted around a spread of 135 basis points above Treasuries, roughly 25 basis points wider than the Norfolk Southern bonds due 2042. We are hearing initial price talk of 130 basis points above Treasuries, which still sounds attractive but could easily tighten given strong investor demand for quality paper, particularly at the long end of the curve. We would view fair value for the new CSX bonds in the area of 120 basis points above Treasuries and would recommend the bonds down to that level.
Owens Corning Issuing New Bonds, Tendering for Old (Oct. 17)
Owens Corning (OC, BBB/UR-) announced an offering of $500 million in new 10-year bonds with proceeds to be used to retire existing debt. The company is offering to buy up to $250 million of its $650 million 6.5% senior notes due 2016 at a spread of 190 basis points over Treasuries, representing a price of about 115. It is also offering to buy up to $100 million of its $350 million 9.0% senior notes due in 2019 at a spread of 245, representing a price of about 127.7. It will use remaining proceeds to retire outstanding borrowings under its current revolving credit facility, of which $367 million was drawn as of June 30, along with general corporate purposes. The company appears to be primarily replacing high-coupon debt with low-coupon debt while extending maturities and improving liquidity, albeit paying up to do so. The 6.5% notes were indicated Oct. 16 at a price of 113, providing a spread of 254 basis points over Treasuries. The 9% were indicated at 126.25, providing a spread of about 335. The $800 million revolving credit facility matures in 2016. The price talk on the new 10-year notes is the low 300s. We now view the 9% bonds as slightly cheap, based on our view that they should trade in the crossover area and considering the very high dollar price. We would view a spread on the new notes in the 275-300 area as fair. Among comps, we note that Toll Brothers' 10-year bond issued earlier this year is indicated at a spread of about 276 basis points above Treasuries, which we view as cheap. D.R. Horton's 10-year is at 255, which we view as rich. Masco's 2022 maturity trades at a spread of about 300, which we view as rich. The Morningstar Industrials BBB- index is at 234 while the Merrill Lynch BB index provides an option-adjusted spread of 386.
We recently placed our BBB credit rating on Owens Corning under review for after the firm provided preliminary third-quarter results and an updated fiscal 2012 outlook that were once again below expectations. The latest announcement puts meaningful pressure on near-term credit metrics, including estimated 2012 leverage in the mid-3 times area, which we believe will not likely support our current rating. We expect the rating review to be completed sometime after the release of full third-quarter results later this month, and we believe a downgrade of one or two notches is possible. Still, we believe the firm has good intermediate-term prospects and an ability to move leverage back into the mid-2 range as construction markets improve over time.
UnitedHealth Funding Brazilian Acquisition (Oct. 17)
On Wednesday, UnitedHealth (UNH, A-) announced plans to issue debt to help fund its recently announced Amil acquisition (UnitedHealth is buying 90% of the top Brazilian health insurer for $4.3 billion, net of tax benefits) and general corporate purposes. We do not anticipate changing our credit rating because of this debt-funded acquisition, and we still think UnitedHealth possesses the best credit profile in the managed-care niche.
However, the managed-care niche often trades tighter than we would expect for the credit ratings, and we suspect UnitedHealth's new issuance may not be attractive either. For example, we are currently seeing whisper numbers for its 3-year, 5-year, 10-year, and 30-year notes at 65, 85, 115, and 130 basis points above Treasuries, respectively. We see those spreads as about fair for the A- rated firm, but given the trading on existing UnitedHealth notes, we wouldn't be surprised to see the new issues priced at slimmer spreads than the whisper numbers currently indicate, or tighter than we deem fair. For example, UnitedHealth's existing on-the-run 2016s, 2022s, and 2042s are currently indicated at spreads around 55, 100, and 110 basis points above Treasuries, respectively.
If UnitedHealth's new issues price at similar levels as its existing notes, we would point investors in the direction of the only other managed-care firm with a moat, WellPoint (WLP). We rate WellPoint at BBB+, and the firm just issued new notes to fund the Amerigroup (AGP, BBB+) acquisition. WellPoint's on-the-run 3-year, 5-year, 10-year, and 30-year notes are indicated around 60, 90, 135, and 145 basis points above Treasuries, or significantly wider than the on-the-run issues at UnitedHealth. Given the potential for ratings convergence between these two issuers in the long run, we think investors may be better served by investing in the higher-yielding WellPoint notes than the new UnitedHealth notes.
HCA to Issue New Debt, Likely at Slim Yields (Oct. 16)
On Tuesday, HCA Holdings (HCA, B+) announced plans to issue $2 billion in senior secured and unsecured notes, with the proceeds expected to be used for a special dividend of about $1.1 billion and to pay down debt maturing in 2013. As we have stated in our recent credit coverage initiation report on the health-care services providers, we have viewed HCA as a prime potential new issuer in the health-care services niche because of its expected cash shortfalls compared with obligations in the next few years and historically low available interest rates. So while we weren't expecting the new issue to be accompanied by a planned special dividend to shareholders, we do not anticipate changing our B+ credit rating for HCA based on these events. Even with the special dividend, HCA's leverage should remain quite manageable, as it will only increase debt/adjusted EBITDA to 4.3 times from 4.1 times at the end of September.
We don't expect HCA's new issue to look attractive if it prices in line with existing trading levels. Since HCA's senior unsecured notes are subordinated to bank debt and other secured notes, we think investors should require a margin of safety on unsecured notes even from its B+ rating. HCA's existing unsecured 2022s are indicated at a yield of 5.60% and a spread of 403 basis points over Treasuries, or significantly tighter than what we deem as fair. If HCA's new notes are priced at similar levels as its existing notes, we'd highlight Tenet (THC, B) as an alternative investment opportunity due to the higher yield (6.59%) and wider spread (547 basis points over Treasuries) indicated in its recently issued 2020 notes. Given the longer tenure of the new HCA bonds compared with the Tenet notes, we view fair value of HCA's new senior unsecured notes at a yield around 6.5%.
J.P. Morgan's New 3-Year Looks Fairly Valued (Oct. 15)
J.P. Morgan Chase (JPM, A) announced that it plans to issue new 3-year fixed- and floating-rate notes. Whisper on price guidance is in the area of 80 basis points above Treasuries, which appears to be about a 10-basis-point new issue concession. We expect final pricing to be 5-10 basis points tighter, and we think these bonds would be fairly valued at that level.
With the massive spread tightening the financial sector has seen over the past several months, it is hard to find any truly optically attractive spread levels compared with where spread levels were at the end of spring. The best comparison for these bonds would be Wells Fargo's 3-year, which trades at a spread of approximately 55 basis point above Treasuries. At the 3-year point, we think Wells' bond is more attractive since investors give up just 20 basis points of spread for one notch higher of rating. As we expect more negative headlines to come out of Europe over the next year, we think J.P. Morgan's greater exposure to Europe tips the scales in Wells' favor at these price points.
From a credit perspective, we like the firm's stellar performance and reputation throughout the financial crisis, but we are wary of some of its mediocre credit metrics. In our view, J.P. Morgan Chase is the best managed of the three money center banks in the U.S., having avoided the risk management missteps that critically injured Citigroup (C, A-) and Bank of America (BAC, BBB) in addition to numerous peers around the world. We see no reason this excellent performance won't continue. J.P. Morgan's regulatory capital levels are sound for a bank of its size, with its Tier 1 common ratio at 10.4% on a Basel I basis and 8.4% on a Basel III basis. The bank's actual capital levels, however, are a cause for some concern, as its tangible common equity/tangible assets ratio is just 5.9%, as we measure it.
David Schivell does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.