CHICAGO, May 1, 2012—Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today launched its new, global Stewardship Rating for stocks, which rates a firm’s stewardship as Exemplary, Standard, or Poor. The new rating replaces Morningstar’s Stewardship Grade for stocks and grading scale of A, B, C, D, and F.
Morningstar equity analysts assigned Stewardship Ratings for about 300 stocks in its coverage universe. Morningstar plans to assign the new rating to approximately 1,200 stocks over the next year. Approximately 10 percent of the companies have received an Exemplary rating, 10 percent received a Poor rating, and the remainder of companies received a Standard rating.
“Our goal is to help investors identify companies that make capital allocation decisions that are in the best interests of shareholders,” said Heather Brilliant, vice president of global equity and credit research for Morningstar. “We’ve spent the better part of a year creating a more holistic rating that we can apply to stocks around the globe, not just in the United States and Canada, and that places greater emphasis on management’s stewardship of shareholder capital. Under the new methodology, our analysts will focus less on ‘check the box’ governance practices and more on decisions that directly improve returns on invested capital and shareholder investment.”
Under the previous Stewardship Grade methodology, Morningstar placed more emphasis on particular governance practices such as different share classes of stock with different voting rights or a staggered board of directors.
The new methodology more explicitly focuses on a management team’s capital allocation decisions and specific factors such as financial leverage, investment strategy, investment timing and valuation, dividend and share buyback policies, execution, compensation, related-party transactions, and accounting practices. For example, Morningstar assigns Eldorado Gold an “Exemplary” Stewardship Rating because of the company’s history of wise and attractively priced investments that have resulted in an enviable portfolio of high-quality, low-cost gold mines. Meanwhile, Kinross Gold has made value-destructive acquisitions, and its operating and capital costs are increasing at an alarming rate, warranting a “Poor” rating.
Morningstar assigns ratings of Exemplary, Standard, and Poor on an absolute basis of ideal stewardship, not against peers within an industry. Most companies will receive a Standard rating, which is also considered a “default” rating in the absence of information to assign a rating. Morningstar’s previous Stewardship Grades do not directly map to the new Stewardship Ratings.
Morningstar will present its new Stewardship Rating methodology at the CFA Institute’s 65th Annual Conference on May 8 at McCormick Place in Chicago. The new Stewardship Ratings will be available in Morningstar DirectSM, Morningstar® Advisor WorkstationSM through its Analyst Research Center module, Morningstar Select, and Morningstar.com®.
Morningstar introduced the former Stewardship Grade for stocks in 2005 and significantly enhanced it in 2007. The company’s 120 equity and credit analysts worldwide cover more than 1,800 companies. For more information about the new Stewardship Rating for stocks, including the methodology, a video, and a list of the approximately 300 ratings available today, please visit http://global.morningstar.com/StewardshipRatingForStocks.
About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individuals, financial advisors, and institutions. Morningstar provides data on approximately 375,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 8 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its registered investment advisor subsidiaries and has more than $190 billion in assets under advisement and management as of March 31, 2012. The company has operations in 27 countries.
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