Morningstar Runs the Numbers

Inspired by Harper's Index (with a tip of the hat to FiveThirtyEight's Significant Digits blog), Morningstar Runs the Numbers uses a numbers-based approach to highlight recent Morningstar research, along with some outside news stories.

7 According to data from the Federal Reserve, U.S. industrial production at factories, mines, and utilities rose 1% in April from March, beating expectations. Director of economic analysis Bob Johnson said it was a pretty broad-based positive reading, but manufacturing, which is 70% to 80% of the number, was particularly encouraging, rising more than 1% month over month.

"This time around, in the month of April, seven of the 10 largest categories showed pretty dramatic improvement from the previous month. Going back over the data for the last several months, it's typically been more like two to five categories being up and the other five to eight being down. So, it's been a pretty dramatic shift there in terms of the diversity, which is good to see. It's not being driven by just aerospace and automobiles like it was at the very beginning of the recovery. It seems to be a little bit broader-based, which is good news."

4, 4, 4 Assets in exchange-traded funds just surpassed $4 trillion. Ben Johnson, director of global ETF research for Morningstar, comments on this milestone as well as the investor-friendly trend toward lower fees (Vanguard Total Stock Market Index Fund sliced its expense ratio to 4 basis points, for example). In addition, Johnson gives his take on the new 4 times-leveraged ETFs.

<4% Less than 4% of all U.S. housing stock has the following three important accessibility features that allow older and disabled Americans to age in place in their current homes: Entrances without steps, single-floor living, and wide hallways, and doorways that can accommodate wheelchairs, according to The New York Times article "Planning to Age in Place? Find a Contractor Now".

"Add two more important elements for aging in place — doors with lever handles, and light switches and electrical outlets that can be reached from a wheelchair — and the proportion drops to 1 percent... You'll often hear older people vow that they won't leave their homes except 'feet first.' Without modifications, however, the design of most older Americans' homes could eventually thwart their owners' desire to stay in them."

5 The market has grown increasingly skeptical of media stocks lately. After March-quarter earnings failed to impress in many cases, the median stock in the diversified media industry has underperformed the Morningstar US Market Index's return over the past month. Though skepticism has weighed on the prices of stocks in the sector, some have brighter prospects than others. Our analysts believe these five media stocks are compelling bargains.

22%, 63%

Retail giants

, which was above his estimate of 30%.

"Wal-Mart and Target both reported earnings which are better than expected this quarter. However, over the coming years, we see diverging storylines, and recommend investors look at Wal-Mart over Target… We also think that [Wal-Mart is] better positioned to withstand the competitive pressures coming into the U.S., as Aldi and Lidl enter the market over the coming years."

4% to 6% Vice president of research John Rekenthaler explored the topic of value stocks' underperformance. After reliably and consistently beating growth companies for decades, lower-priced stocks have lost their edge. Rekenthaler digs into GMO co-founder and value investor Jeremy Grantham's quarterly letter, in which Grantham discusses why value investing has struggled and why it may be different this time. Corporate profits have transformed, Grantham says, looking at return-on-sales figures for the S&P 500 from 1970 through 2015. Grantham concludes, and Rekenthaler concurs, that value investors are unlikely to thrive until corporate profits recede.

"For the first half of the period, the ROS hovers between 4% and 6%. ... Then all heck broke loose. The ROS burst through its 25-year band in 1996 (while Alan Greenspan mused about "irrational exuberance"), set another record in 2000, beat that mark again in 2007, and surpassed it once more in 2014. In the period's second half, the past served as no guide whatsoever for the future. Grantham draws another line, illustrating the new equilibrium, but this action is even more artificial than his first. Who can tell where the ROS is headed?"

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