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Kathy Panagopouloskathy.panagopoulos@morningstar.com
Morningstar Releases Three-Year Performance on Tortoise and Hare Stock Portfolios; Tortoise Wins 'Race'

CHICAGO, Jun 24, 2004 – Morningstar, Inc., a leading provider of independent investment research, today released three-year performance figures for its two model stock portfolios: the Tortoise Portfolio and the Hare Portfolio. Morningstar launched the portfolios in June 2001 in its monthly newsletter, Morningstar® StockInvestorTM, to help investors find undervalued stocks with good long-term prospects.

The Tortoise Portfolio is designed for conservative stock investors who embrace slow and steady growth. It has outperformed 100 percent of all U.S. large-blend mutual funds and more than 99 percent of all U.S. large-cap equity funds in the Morningstar database since the portfolio’s inception. The Tortoise Portfolio returned 12 percent annually for the three-year period ending June 17, 2004, outperforming the S&P 500 Index by nearly 14 percent per year. The S&P 500 Index was down about 2 percent annually during the same period.

The Hare Portfolio is intended for investors who can handle more volatility. It gained 2 percent annually from June 18, 2001 to June 17, 2004, outperforming the S&P 500 Index by about 4 percent per year. During this period, the Hare Portfolio outperformed 96 percent of U.S. large-growth funds, which fell an average of 4 percent per year.

Combined, the two Morningstar portfolios returned 7 percent per year from June 18, 2001 to June 17, 2004, and beat the S&P 500 Index by more than 9 percent per year.

For the one-year period between June 18, 2003 and June 17, 2004, the Tortoise Portfolio returned 14 percent and the Hare Portfolio returned nearly 21 percent. The S&P 500 Index was up 16 percent for the same time period.

Morningstar’s primary goal for the portfolios is to generate positive returns regardless of the relative yield for different asset classes. The portfolios also strive to outperform the S&P 500 Index over any three- to five-year time period. Performance data for both portfolios are published monthly in Morningstar StockInvestor. Morningstar seeded each portfolio with $50,000 in 2001.

Mark Sellers, equities strategist and editor of Morningstar StockInvestor, manages the portfolios using what he calls the “fat-pitch” approach.

“We focus on companies with wide economic moats, meaning they reside in profitable industries and have long-term advantages versus competitors,” Sellers said. “Then we wait for the fat pitch--the right company at the right price, which means the stock should sell for significantly less than our estimate of its fair value. When we can’t find the right company at the right price, we hold cash. We hold a concentrated portfolio and don’t trade very often. This strategy has worked very well for us.”

The Tortoise Portfolio holds stocks with below-average volatility. The top holdings include:

  • Berkshire Hathaway (BRK.B) - 9 percent of portfolio (held since June 18, 2001)
  • Anheuser-Busch (BUD) - 6 percent of portfolio (held since Oct. 20, 2003)
  • TransCanada (TRP) - 6 percent of portfolio (held since Jan. 23, 2004)

The Hare Portfolio holds stocks with above-average growth prospects. The top holdings include:

  • CarMax (KMX) - 10 percent of portfolio (held since Jan. 20, 2004)
  • Biogen IDEC (BIIB) - 10 percent of portfolio (held since Dec. 12, 2002)
  • Chicago Mercantile Exchange (CME) - 8 percent of portfolio (held since Nov. 17, 2003)

About Morningstar® StockInvestorTM
Morningstar launched the StockInvestor newsletter in 1998. Every month, the newsletter includes straightforward commentary on the Tortoise and Hare Portfolios, Bull and Bear debates on two high-profile stocks, and the Morningstar Rating for stocks. The newsletter also includes red flag alerts of stocks to avoid and The Bellwether 50, a watch list of 50 stocks that possess large “economic moats,” or competitive advantages. An annual subscription costs $99.

About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent investment research in the United States and in major international markets. The company offers an extensive line of Internet, software, and print-based products and services for individuals, financial advisors, and institutional clients. As of Dec. 31, 2003, Morningstar tracked more than 100,000 investment offerings, including stocks, mutual funds, and similar vehicles. The company has operations in 16 countries.

Editor’s Note: For a complimentary subscription to Morningstar StockInvestor, or for a complete list of stocks in each portfolio, contact Kathy Habiger, Morningstar Corporate Communications, 312-696-6241. 

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