Which is more important?The “stars” or the timeliness ranking?
In this session we will look at both the Morningstar and Value Line databases. We will compare the findings of one data base with the other..
On the surface, the two databases look a lot alike. Each has sections for stocks, mutual funds, and ETF’s. Each has a ranking system. Value line uses a one through five system with one being the best and five the worst. Morningstar uses a star ranking that has five the best to one the worst to help users choose stocks.
The library’s subscriptions in both services compare well to each other in most areas of coverage. However, the Morningstar subscription also coverers ETS, while our Value line subscription does not.
The Value Line service has several different categories of rankings on the one to five scale. These are: 1. Highest approximately 100 stocks 2. Above Average approximately 300 stocks 3. Average approximately 900 stocks 4. Below Average approximately 300 stocks 5. Lowest approximately 100 stocks
Morningstar on the other hand uses a “star” system. The “stars” correspond to the expected rate of return for the investor in the financial instrument. 5 star, a rate of return greater than cost of the stock. 4 star, above average rate of return 3 star average return 2 star below average return 1 star, the stock is expected to loose money Note that the rating system is the reverse of that used by Value Line, i.e. one is highest and five lowest
We will rank the portfolios that each has on their sites by the ranking that the other uses. Morningstar by Value Line’s timeliness rank. Value Line by Morningstar’s “star” ranking system. The results may surprise you!
This portfolio is for those who are termed “aggressive” investors. It is onethat Value Line thinks will have a good chance to have substantialappreciation over the next12 months. There is risk involved in thisportfolio as well as any of the others.Note that this portfolio like all portfolios is subject to change due tomarket conditions and the financial stability of each company. Thisportfolio was current as of the date of inception, which was February13, 2012.We will follow these portfolios over time to see which, if any actuallymake a profit.Also note that in all likely hood, our results would be better if we dailymonitored these stocks. Or if we took protective measures like stop losseswhich are written at a certain percentage like 3% up to say 6% of theamount invested. We should always try and make sure we have someway to get our funds out of the market if the trade turns against us.
Four Stars Three Stars Two Stars 0 StarsAAPL AAP DTV CSTRNSC BLL FL DANTEVA MIICF GCO HELE PVH KEX KMT TKR ODFL MAT TGI%Ret % Ret %Ret %Ret17.33 6.85 7.70 6.07
For the moderate investor, includes stocks thatwill provide above-average income and whoseprices have the potential to increase.Typically, more conservative investors will bemost comfortable with this portfolio.
List of stocks from this portfolio. These are intended for incomeand potential price appreciation.Four Stars Three Stars Two Stars One StarABT KO LMT MOLXCVX CL WMTCOP DDRSG EMRSNY HONSNA INTCUPN KFT MCD UPS VZ
Four Stars Three Stars Two Stars One StarABT KO LMT MOLXCVX CL WMTCOP DDRSG EMRSNY HONSNA INTCUPN KFT MCD UPS VZ%Return % Return %Return %Return 2.24 2.29 1.28 3.41
Emphasizes stocks with worthwhileappreciation potential. It is mostappropriate for investors focused onlong-term capital gains.
Stocks in this list with Morningstar ranking.Five Stars Four Stars Three Stars Two Stars 0 StarsHAL GES AFL HOG CBOU JNJ CVS HRL DY MOS DIS ESL NOV MGA PEP XLNX X CELG UNH GOOG
Five Stars Four Stars Three Stars Two Stars 0 StarsHAL GES AFL HOG CBOU JNJ CVS HRL DY MOS DIS ESL NOV MGA PEP XLNX X CELG UNH GOOG% ret %ret %ret %ret %ret-10.48 +4.53 +5.56 +5.17 +9.53
Focuses on stocks with above-averagedividend yields. Investors with an interestin current income are likely to find interesthere.
Here are the stocks in this portfolio with the Morningstar Starrank.Four Stars Three Stars Two Stars 0 StarsABT LNT BT ALRPRDS.A DD BTI LG HNZ ED TA.TO IP OGE WPC MCD RAI NOC SO POR SLE
Four Stars Three Stars Two Stars 0 StarsABT LNT BT ARLPRDS.A DD BTI LG HNZ ED WPC IP OGE MCD RAI NOC SO POR SLE%Ret %Ret %Ret %Ret3.13 1.15 2.33 -5.86
Stars are useful, up to a point.The Value Line timeliness may be a betterindicator of future stock growth potential.Note that it is only useful for a usually limitedperiod of time. The user will need to set stops andcheck at least weekly to determine if yourinvestment goals for the stock have been met.We will still need to set “stops” so no matter whatthe market does we will still be able to preserveour capital.
Ranked One Ranked Two Ranked Three Ranked Four Ranked Five UnrankedDFS 3star ZMH 4star CMP 4 star Payx 4 star CX 4 star CSCO 4 star STRA 3 star JOE 5 star MSFT 4 star EBAY 4star KMX 3 star AMGN 3 star ADSK 3 star CME 3 star NOV 4 star ISCA 3 star ORCL 5 star WU 5 star IGT 4 stars
Rate of ReturnRanked 1 Ranked 2 Ranked 3 Ranked 4 Ranked 5DFS 3star ZMH 4star CMP 4 star PAYX 4 star CX 4 star CSCO 4 star STRA 3 star JOE 5 star MSFT 4 star EBAY 4star KMX 3 star AMGN 3 star ADSK 3 star CME 3 star NOV 4 star ISCA 3 star ORCL 5 star WU 5 star IGT 4 stars One Two Three Four Five+15.17% +2.46% -3% +11.00 -8.64%
We have ranked Value Line by Morningstar. We have also looked at the Value Line portfolios listed by the “stars” system. It would appear that the factor of timeliness, at least in the short run is a reasonably good indicator for the potential for stock growth.