Question 1

How do Morningstar stock, ETF and fund ratings work?

Accepted Answer

Inside Morningstar Investor, two ratings systems do a lot of the heavy lifting when it comes to identifying opportunities. Here's how each one works. About Morningstar Ratings for Shares Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss. Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company’s future cash flows, resulting from our analysts’ primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued. Moat Rating: An economic moat is a structural or competitive advantage that allows a firm to generate attractive long-term profits. Companies with no moat are considered to lack long-term competitive advantages. Companies with a narrow moat are those we believe are more likely than not to sustain attractive profits on average for at least a decade. For wide-moat companies, we have high confidence attractive profits will persist for 10 years and are likely for at least 20 years. Uncertainty Rating: Morningstar’s Uncertainty Rating is designed to capture the range of potential outcomes for a company. It reflects our confidence in forecasting cash flows and the fair value estimates for companies. An investor can think of the Uncertainty Rating as reflecting the underlying business risks, influenced by factors such as debt load and cyclicality. The rating is used to assign the margin of safety required before investing, which explicitly drives our stock star ratings. For higher risk businesses with wider ranges of potential outcomes, an investor should consider a larger margin of safety between the estimate of what the shares are worth and how much an investor is prepared to pay. About Morningstar Medalist Ratings for Funds The Morningstar Medalist Rating for funds is a forward-looking, qualitative rating that helps investors find funds that are likely to outperform its Morningstar Category average over the full investment cycle, after considering a fund manager’s approach to their investment strategy (process), the individuals who manage the fund (people), the asset manager that offers the fund (parent entity), and fees. Medals (Gold, Silver, and Bronze) indicate that our research methodology expects a fund to outperform its category average over a full market cycle. Neutral ratings mean that the methodology is not expecting a fund to outperform and Negative ratings express this with increased conviction.

Question 2

Why do Morningstar’s ratings on my broker platform differ from the ones in Morningstar Investor

Accepted Answer

The research that you receive through your Morningstar Investor Membership is qualitative—our analysts have rated the stock and provided input and opinion to the final fair value. The research that you access through your broker is quantitative in nature – what this means is that the fair value is decided based on data inputs and algorithms, without weigh in from our analysts. This is why the research and ratings may differ between your membership and your broker. Morningstar Investor is not a broker service – it offers a different service to your broker – focusing on providing investors a holistic portfolio management tool that helps you track, monitor and maintain your investments.

Question 3

I receive Morningstar ratings for free from my broker. How is this product different? What is the difference if I access it directly?

Accepted Answer

The level of access to Morningstar ratings and data differs broker to broker, but in most instances, the ratings that you receive free from your broker are quantitative in nature. This means that fair value (the long-term intrinsic value of a share) that is assigned to a share is calculated based on an algorithm. As part of Morningstar Investor, you receive access to qualitative analyst research on more than 1600 stocks, forward-looking ratings on over 3,000 ETFs and managed funds. Morningstar Investor is a holistic solution that is focused on the investor, and not the investment. It offers access to ratings, as mentioned, and data on over 48,000 securities. It also includes analyst insights and editorial thought leadership, including forecasts for ASX 200 stocks. As part of your subscription, you also receive access to a Portfolio Manager that is powered by award winning Portfolio Tracker, Sharesight and integrated with Morningstar research and data. This is accompanied by a suite of tools and calculators to help investors reach their investing goals, including goal calculators, asset allocation models, ETF model portfolios and more.

Question 4

What if I already have Sharesight subscription?

Accepted Answer

If you already have a Sharesight subscription, we will pick up your bill (up to the value of the Standard Plan). For existing Sharesight subscribers, you are able to link your existing account to your Investor subscription. If you are on the monthly Standard plan, the billing will be directed to Morningstar from the following month. If you are on an annual plan, the next annual payment will be paid directly by Morningstar. If you are on a higher priced plan you will be charged the difference between the Standard plan cost and your plan.

Question 5

What happens after my free 4-week trial^ of Morningstar Investor ends?

Accepted Answer

Your access to Morningstar Investor automatically pauses once your trial ends if you choose not to upgrade to a paid subscription. No cancellation is needed, and you will not be charged as no credit card is required to sign up for a trial of Morningstar Investor. Your saved data, including any portfolios, will be stored even after your trial ends. You can upgrade to a paid membership for AUD $675 per year at any time to continue from where you left off without losing your information.

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Frequently Asked Questions

How do Morningstar stock, ETF and fund ratings work?

Why do Morningstar’s ratings on my broker platform differ from the ones in Morningstar Investor

I receive Morningstar ratings for free from my broker. How is this product different? What is the difference if I access it directly?

What if I already have Sharesight subscription?

What happens after my free 4-week trial^ of Morningstar Investor ends?