This is not a paid endorsement.
A few weeks ago I subscribed to a premium service at Morningstar that I think is called Portfolio Manager, specifically the X-Ray function. It is in the tools link and costs a little over $100 for the year. My primary use for this is to analyze portfolios of prospective new clients for the firm's planners (as a side note the structure of our firm is that we have three financial planners who bring in new clients, do financial plans and determine asset allocations, I then implement portfolios based on the allocation determined by the planners) and for any portfolio consultation I do for people that are not clients.
While there are a lot of functions that this can do my primary use is to input holdings and share amounts to then assess weightings for sector, country, style, cap size and other statistics. The depth of the reports is very good.
There are a couple of quirks that are either issues with the application or user error;-) When I plugged in my portfolio it told me that 79% of my holdings are in large cap. It also says that the median market cap of my holdings is $14.5 billion which is, according to Morningstar is .30 of the S+P 500 median cap size which based on that I calculate to be $48.3 billion. I don't think that classifies the cap size of my portfolio as large cap as implied by the style box part of the report. As an example I have one stock with a $3 billion cap that shows up as large cap growth, $3 billion?
It also put some high yield foreign stocks in the value box and some high yield foreign in the core box and I'm not sure why. It had no data one one stock I own that is a NYSE listed ADR which surprised me. I also looked high and low on all of the pages for the beta and could not find it.
The Interpreter tab told me that my portfolio is aggressive and warned me that I may have too much in foreign and emerging stocks. Only 18% of my holdings have a beta greater than 1 so I'm not sure that I have an aggressive portfolio. Perhaps just having a lot foreign exposure leads them to generically conclude more aggressive.
The flaws are minor and the tool is very good. I would encourage anyone take the free trial and see what it has to offer. I can't imagine you won't learn a lot about your holdings.
Wikinvest Wire
2 comments:
Roger, let me first confess that I haven't actually looked at the tools you mentined here. However, you pointed out some very obvious flaws with the output of these tools. My question is, if you spotted obvious flaws, how do you know the rest of the output is valid? It's like the rats in the kitchen--for every one you see, there are several you don't see.
I have found the Morningstar classifications to be interesting and useful. Several screens that I run to find value stocks end up finding Morningstar core stocks. One of the reasons is that in addition to value criteria I screen to weed out financially weak stocks. I also insist on a few other non value measures such as relative strength.
I too have found a few other anomalies but I think most of them can be explained away as relative values. The largest convenience store chain is going to have a much smaller cap than GE or XOM but it still might be the largest of the group.
I have my own set of biases which means I can get a real kick out of reading a Morningstar report. I hope I do not argue with myself as much as some of these guys.
S&P is preparing to sell institutions a matrix system similar to Morningstar’s and Ed Yardeni is starting to rate stocks by these categories. S&P will also rate stocks on a duration scale similar to bond durations!
All these tools have flaws but I would rather drive a nail with a ball peen hammer than with the sole of my shoe.
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