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.

6 How should you look at extreme performance in a fund? There's a natural emotional response to want to invest more in your winners and dump the losers, but that's not really a good idea, says director of manager research Russ Kinnel. To illustrate the point, Kinnel examined six Morningstar Medalists based on year-to-date performance.

"While short-term results won't tell you much about skill, they do illuminate what kind of fund you own. One of the first things I want to see with extreme performance is whether it fits what I'd have expected. I would not necessarily expect top- or bottom-percentile performance in any seven-month stretch, but some funds are given to extreme performance and therefore it is less surprising."

5 The financial-advice industry features a bewildering array of titles, designations, and compensation schemes. Some advisors are fiduciaries, some aren't. And even though advisors must obtain licenses if they're selling securities and pass tests and log work experience if they want to earn certain credentials (such as the certified financial planner designation), there aren't any minimum standards in place for calling yourself a financial advisor. Director of personal finance Christine Benz lays out five key questions to ask of prospective advisors.

50 Chicago celebrated the 50th anniversary of the dedication of Pablo Picasso's first large-scale civic sculpture in America. This 50-foot untitled steel sculpture, whose subject has been widely speculated upon, stands in Daley Plaza in the Chicago Loop. Like the Eiffel Tower in Paris, however, the now iconic sculpture was initially met with controversy; many wanted to replace the sculpture with the likeness of a historical figure instead. According to the Chicago Tribune:

"Col. Jack Reilly, the mayor's director of special events, immediately urged removal of the sculpture. Ald. John J. Hoellen went further, recommending that the City Council "deport" the piece and construct in its place a statue of 'Mr. Cub . . . Ernie Banks.'"

3 Many people think indexers are hurting the market, but vice president of research John Rekenthaler doesn't think the three most often-cited arguments hold water.

42% Disney announced the acquisition of an additional 42% share of BAMTech, raising Disney's ownership to 75% of the direct-to-consumer streaming tech firm that was spun out of MLB Advanced Media. The firm will use BAMTech to launch a new OTT network of ESPN channels in 2017 and a U.S. version of DisneyLife, an SVOD aimed at families, in 2019, said equity analyst Neil Macker. At current prices, Macker thinks the stock looks undervalued.

"We are maintaining our wide moat rating and our fair value estimate of $134. With shares trading in the 4-star range, the stock may offer an attractive entry point for investors."

20 Sustainable, or ESG investing (which stands for environmental, social, and governance), doesn't appeal to every investor. For some, the goal of investing is maximizing returns and not promoting social responsibility. But those aims don't necessarily have to be antithetical: Sustainable investing allows investors to consider relevant nonfinancial factors in the search for alpha. We screened the Morningstar US Sustainability Index to find 20 undervalued stocks that score well on ESG metrics.

3 Investors looking to expand their fixed-income exposure beyond core bond funds can face an enormous number of often bewildering choices. Our analysts share three of their favorite options among high-yield, bank loan, and nontraditional funds that could make good satellite bond holdings.

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