A great source for stock research

I’d like to make a quick pitch for a new book I bought this weekend: Morningstar Stocks 500.

First off, I do not follow this guide brainlessly. I find it to be a great way to look at potential investments. It doesn’t cover every investment (only 500, hence the name). Their valuation method is not flawless, but neither is mine. Some of their recommendations and analyses are weak, but overall it’s not too bad.

So, why do I like it? I think it’s a great verification source. I like to use it to scan valuations of companies and to read their take on each business and management. Even when I disagree with them, it’s pretty easy to understand why their take is what it is.

I also think their approach is spot on. First, they look at the economics of a business, its moat. Second, they look at management, what kind of stewards are they for shareholders. Third, they look at valuation, how much is a business worth. This is the same basic approach I use, too, and so I like to read others who take that same approach.

How should this tool be used? Personally, I use it after I’ve already done an evaluation of a potential investment. After I’ve learned about the business, its competitive advantages, its management, its financial reporting, and formed a thorough opinion of all these things myself, I like to look at Morningstar’s take on the business and compare it to mine. Either I get a warm fuzzy because they did things similarly to me, or I can see how they evaluated things differently and I can question my position.

Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.


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