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The Short Answer

Answering Your Unanswered Questions

Viewers of the recent Morningstar Individual Investor Conference wanted clarification on 5-star stocks, moat ratings, market cycles, and more. Here are the answers.

Morningstar recently held its annual online conference for individual investors and, as usual, viewers submitted loads of great questions, many of which we didn't have time to answer. For this week's Short Answer, we'll tackle some of these questions. And if you missed the conference, you can catch replays starting next week here at 

How often do you review the stocks on the recommended 5-star list? I noticed there are only 14 currently on the list.
The number of stocks that carry a 5-star rating can potentially change every day. The Morningstar Rating for stocks is calculated by comparing the market price for a stock at the end of the trading day with our analyst's fair value estimate of the security. A stock that is trading at a deep discount to its intrinsic worth would be rated 5 stars, with the size of the discount needed to reach that highest rating depending on our analyst's assessment of the uncertainty surrounding the fair value estimate. The star rating can change on any given day due to a move in price, an adjustment to a fair value estimate or uncertainty rating by the analyst, or a combination of both.
For more on how Morningstar analysts set fair value estimates and fair value uncertainty ratings, see this Short Answer

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