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Financial Advice

Weekly Wrap: Ironically Good Companies, Top Manager Retires, and Stock of the Week

And practicing gratitude.

In this week’s Our Picks column, I looked at companies that one might call “ironically good”: companies that have built significant competitive advantages despite the poor decisions their managers have made when it comes to balance sheets, investments, and shareholder distributions. Specifically, 13 companies that our analysts cover earn wide or narrow Morningstar Economic Moat Ratings and poor Morningstar Capital Allocation Ratings.

To no one's surprise, management at Wells Fargo makes the list of poor capital allocators. Senior analyst Eric Compton argues that management's lack of investment in internal risk monitoring and operation controls--and its foot-dragging on improving the bank's internal regulatory shortcomings--have destroyed shareholder value. Nonetheless, we think the bank possesses a stable, wide moat based on its cost advantages and switching costs. See the irony? To find out what other companies made our list, check out the column.

Funds and Key-Person Risk

Speaking of managers--and in this case, an exceptional one--Fidelity revealed this week that Joel Tillinghast, the longtime skipper of Fidelity Low-Priced Stock FLPSX, will retire in late 2023. Tillinghast has led the fund since 1989 and is regarded as one of the industry’s best value investors. After Morningstar awarded Tillinghast an Outstanding Portfolio Manager award in 2021, he shared some lessons learned during our annual conference. My favorite: “The biggest learning of the pandemic is that I’m an idiot.” Hardly! But his modesty is refreshing in an industry rife with self-proclaimed gurus.

We’ve placed our Morningstar Analyst Rating for Fidelity Low-Priced Stock under review as our analysts digest the news. We don’t always change our ratings because of fund manager departures--many factors come into play. But just a few months ago, we identified the fund as one of four facing significant key-person risk, noting that the fund’s reliance on Tillinghast makes its future uncertain after he departs. In fact, the firm is home to several terrific stock-pickers--including Fidelity Contrafund’s FCNTX Will Danoff and Fidelity Growth Company’s FDGRX Steve Wymer--who put their own unique stamp on their funds, thereby making it more challenging to replace them when they eventually move on.

Stock of the Week

Where do we turn when our favorite brand of detergent becomes too expensive or ground beef gets too pricey? Evidently, to Walmart. Walmart WMT reported solid third-quarter results as shoppers sought lower prices as inflation continued to pinch pocketbooks.

"Walmart's purchasing power and cost leverage are unparalleled, in our view, and so the company should be in a better position to secure products economically than smaller rivals," says analyst Zain Akbari in his stock analyst update. "The inflationary environment provides some cover for the retail juggernaut to boost prices as well, particularly as customers look to the gaps between Walmart's pricing and that of its rivals."

Although Akbari says we plan to modestly raise our fair value estimate on the wide-moat retailer’s stock, shares nevertheless look about fairly valued to us.


This is the last issue of Smart Investor before Thanksgiving, which ushers in a season of giving. It’s a time to find our good and act on it. That may mean giving your time to a food bank. Or sharing your special talents with a senior center. Or supporting the charitable acts of the children in your life, whatever they may be.

It may also mean donating money to causes that matter to you. This week, my colleague Christine Benz shared her pointers for how to check up on a charity to make sure your dollars are being effectively spent. She's also shared charitable strategies to pursue--such as donating appreciated stock, contributing to a donor-advised fund, or making a qualified charitable distribution from an IRA--that, in addition to helping others, may also yield tax benefits to you.

I hope readers in the U.S. have a lovely Thanksgiving.

--Susan Dziubinski

Editor's Picks

How Can Investors Determine Company Risk Amid the 'Great Resignation'? Here are some ways to identify companies facing challenges related to their human capital. 13 Good Companies Run by Poor Capital Allocators These firms all have wide and narrow economic moats but earn poor capital allocation ratings. Yes, Fancy Climate Summit Means Small Investors Must Be Vigilant, Too Vote your shares, make sure your fund manager has a Net Zero plan, and look at opportunities in climate solutions, experts say. Which Charities Deserve Your Dollars? Charitable giving offers valuable tax breaks, but it's also worth checking up on a charity's effectiveness. When Bad Taxes Happen to Good Funds Learning from past misfortunes can help investors avoid future tax woes. Special Report: Diversification Strategies Why diversification matters and how to hone your approach.

Portfolio Planning and Personal Finance With Christine Benz

5 Tips for Getting the Most Out of a Health Savings Account Maximize the benefits of these accounts.

Mutual Funds and Exchange-Traded Funds

You Probably Own Too Much Domestic Equity Home bias is a global phenomenon that reduces diversification. It's Hard to Argue for High-Active-Share Funds Investors in highly differentiated funds have mostly endured higher risk while paying higher fees for mostly mediocre relative returns. How Useful Is It to Close Funds? No one likes a bloated fund. China's Market Risks Are Nothing New They've always lurked beneath the surface. What to Consider When Shopping for a 529 Plan Savers' goals aren't all the same. 3 High-Active-Share Funds We Like These Morningstar Medalists have served shareholders well. Top Fund Managers Retreat From China in the Third Quarter Morningstar Medalist funds largely sold regulation-impacted businesses. Best Funds in Fidelity's Sweet Spot Our favorites from Fidelity's lengthy menu of large-growth funds. 3 Low-Active-Share Funds We Like These highly rated funds are low on the active-share spectrum.


Looking for Value From Costco? Buy a Membership, Skip the Shares The trading price implies performance ahead of our already lofty targets. Why Investors Can't Ignore Tesla 5 charts on Tesla's growing influence in the stock market. What Will Drive Holiday Sales in 2021? A confluence of factors will bolster consumers' holiday spending this year. Microsoft Flexes Cloud Muscle, but Is It a Buy Today? Morningstar's analyst says Microsoft's revenue growth should remain robust with margins continuing to improve for the next several years. 2 Sectors With the Largest Fair Value Increases We raised our expectations for many energy and technology stocks, but are there any opportunities as a result?

Rekenthaler Report

The Hidden Costs of Free Investment Services Looking gift horses in their mouths. The Great Disappointment of Active Share Overselling a bright idea.

Advisor Insights Year-End Tax Planning During Uncertain Times Tax laws are in flux, but investors can take these steps now.

The Long View Podcast

Robin Wigglesworth: The Rise of Index Investing and the 'Renegades' Who Ushered It In The Financial Times' correspondent discusses his new book on the history of index funds and the remarkable people who brought indexing into the mainstream.

Sustainability Matters

ESG Ratings Are Now Available for Bond Funds, Allocation Funds A change to the Morningstar Sustainability Rating methodology means we can rate more funds, in more categories.


Is Gamification Bad for Investors? We encourage the SEC to figure out which nudges and conflicts are problematic and avoid sweeping changes that could stifle savings.


Why Retail Investors Aren't 'Dumb Money' and Where They Have an Edge Charles Rotblut, vice president at the American Association of Individual Investors, discusses the role of individual investors, motivations behind investor behavior, and who is really driving the market. These Renowned Stock-Pickers Are Taking Change in Stride Amid disruption, two Oakmark and Morgan Stanley leaders keep an eye on company fundamentals. Investors Return to U.S. Equity Funds in October Flows into U.S. equities ramp up but remain subdued elsewhere. Shedding Light on Sustainable Stocks An early look at Sustainalytics' ESG Risk Rating for companies.

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