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Kathy Panagopouloskathy.panagopoulos@morningstar.com
Morningstar Introduces New 'Tortoise' and 'Hare' Portfolios, Helps Investors Identify Undervalued Stocks with Long-Term Prospects

CHICAGO, Jul 06, 2001 – Morningstar, Inc., a leading investment information firm, is introducing two new stock portfolios--the Tortoise and the Hare--to help investors find undervalued stocks with good long-term prospects. The portfolios will debut in the firm's newly revamped monthly newsletter, Morningstar® StockInvestorTM, which will be mailed to subscribers in mid-July. Drawing from Morningstar's proprietary stock research and analysis expertise, the new Tortoise and Hare portfolios are a straightforward approach to helping investors construct their own stock portfolios.

"Creating successful stock portfolios is more than just buying the right stocks--it also requires taking a long-term viewpoint, having the discipline to buy stocks below their fair value, and knowing when to sell," said Mark Sellers, editor in chief of Morningstar StockInvestor. "Our new Tortoise and Hare portfolios will spotlight Morningstar's approach to investing and stock-picking, using fundamental analysis to determine whether a company's stock price is fairly valued."

As the names imply, the Tortoise portfolio is designed for conservative stock investors who embrace steady growth, while the Hare portfolio is intended for those who can handle more volatility. The Tortoise portfolio has a value orientation and holds stocks that have lower-than-average valuation ratios, signifying low investor expectations. The Hare portfolio has a growth orientation, holding stocks with higher-than-average valuation ratios, signifying loftier investor expectations. 

"We think the Tortoise and Hare analogy is a great way to explain the value and growth approaches to investing," adds Sellers. "And while our goal is for both portfolios to outperform the S&P 500 on a tax-adjusted, long-term basis, it will be fun to watch the race between them each month." 

The initial Tortoise portfolio is composed of 12 stocks:

  • Berkshire-Hathaway (BRK.B)        
  • Black & Decker (BDK)       
  • Humana (HUM)        
  • Interpublic Group (IPG)       
  • Jones Apparel (JNY)       
  • Kemet (KEM)       
  • Kimberly-Clark (KMB)       
  • Liz Claiborne (LIZ)       
  • Office Depot (ODP)       
  • Sears (S)       
  • Service Corp International (SRV)       
  • Sherwin-Williams (SHW)

The initial Hare portfolio is composed of 11 stocks:

  • Alcide (ALCD)       
  • Autodesk (ADSK)        
  • Boston Scientific (BSX)       
  • Charles Schwab (SCH)       
  • EMC (EMC)       
  • Knight Trading (NITE)       
  • Nokia (NOK)       
  • Oracle (ORCL)       
  • Reuters (RTRSY)       
  • Sprint (FON)       
  • Sun Microsystems (SUNW)

For each portfolio, Morningstar will assume a $10 brokerage commission for each trade along with a 28% tax rate on all short-term capital gains and a 20% tax rate on long-term capital gains. The portfolios also assume that dividends are reinvested every month. 

Explains Sellers, "We want to simulate as closely as possible the real-world experience of investors. We'll account for brokerage fees and consider the tax implications of our decisions, factors often overlooked by others who publish lists of stock recommendations without accounting for the effects of trading expenses on overall returns."

Morningstar's portfolio committee, led by Sellers, Pat Dorsey, director of stock analysis, Haywood Kelly, editor of Morningstar.com, and Morningstar's senior stock analysts, will make the buy and sell decisions for each portfolio. Morningstar tracks, analyzes, and writes detailed research reports on 1,000 stocks. 

Composition updates and performance data for each portfolio will be published monthly in Morningstar StockInvestor. Morningstar's performance goal is for each portfolio to outpace the S&P 500--an index considered to be a proxy for the performance of the stock market--on a long-term, tax-adjusted basis. 

About Morningstar StockInvestor

Morningstar launched the StockInvestor newsletter in 1998. The July 2001 issue reflects a major redesign of the publication. Every month, the newsletter will include straightforward commentary on the Tortoise and Hare portfolios, Bull and Bear debates on two high-profile stocks, interviews with well-known money managers, and Morningstar's proprietary Stock Grades. The newsletter also will include in-depth analysis on one small-cap stock pick, red flag alerts of stocks to avoid, and a list of 50 stocks that possess large "economic moats," or competitive advantages. An annual subscription costs $89 and can be ordered by calling 800-735-0700, or via the Morningstar Web site, http://www.morningstar.com. 

About Morningstar, Inc.

Chicago-based Morningstar, Inc. is a leading provider of independent investment information. Morningstar offers an extensive line of print, software, and Internet-based products and services for individuals, financial advisors, institutions, and the media. The company is the trusted source for investment information, data, and analysis of stocks, mutual funds, exchange-traded funds, closed-end funds, and variable annuity/life subaccounts.

Morningstar.com is listed among the top investing sites by publications such as The Wall Street Journal, Barron's, SmartMoney, Money, Worth, and U.S. News & World Report. Morningstar provides investment information for a number of leading Web sites, including Microsoft MoneyCentral, Quicken.com, America Online, Yahoo! Finance, and Netscape Personal Finance.

 

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¬ 2001 by Morningstar, Inc. All rights reserved.

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