Morningstar Equity Research Overview
Eric Dziewiontkoski
May 31, 2018

 

[The event will begin shortly.] 

[Host:] 

Hello, everyone, and thank you for joining us today. On behalf of CIBC Investor's Edge, I would like to welcome you all to this webinar. My name is Dimple, and I will be your host for this event. 

[CONTROLS] 

Now a few things to note before we get started... To view this webinar full screen, please click on the expander arrows located on the top right-hand corner of your screen. And should you have any questions during the presentation, kindly take a note and you will have the opportunity to submit your questions after the presentation. 

[DISCLAIMER] 

Also, CIBC Investor Services Inc. does not provide investment or tax advice or recommendations, so everything we share today is for education purpose only, and we are recording today's session, and the link will be emailed to anyone that registered online. 

[SPEAKER, Eric Dziewiontkoski]

Our topic for today's webinar is an overview on Morningstar research. To present this we have Eric Dziewiontkoski with us this afternoon, and we're really excited and thrilled to have him here. Eric is a Product Manager within Morningstar's research distribution group. He oversees Morningstar's research licensing business in North America and works with clients who use Morningstar's global analyst and quantitative research. Eric is based in Chicago and has been with Morningstar since 2013. So with great pleasure, please join me in welcoming Eric. 

[Morningstar Equity Research Overview]

[Speaker:]

Great. Thank you, Dimple, and thank you everyone for joining. Hope everyone is doing well. As Dimple said, today we're going to be talking about Morningstar's research which is available on CIBC's Investor's Edge platform. As Dimple said, my name is Eric Dziewiontkoski. I'm a Product Manager with Morningstar's research distribution group. I work with clients like CIBC Investor's Edge to make sure that users our research are fully trained and aware and able to leverage our research to make the best investment decisions available. 

A little overview of today's agenda, we're going to spend some time walking through Morningstar's equity research, our ETF research, and then where we can find the research within Investor's Edge platform, and then we'll close out today's session with a brief Q&A.

[Morningstar Research: Global Scope/Local Expertise]

Just to provide a brief history of Morningstar for those who aren't familiar with us, we were founded in 1984 as a mutual fund investment independent research company, and really, our goal was to help investors make better decisions. In fact, our mission is very simple. It's to create great products that help investor's reach their financial goals. Today, we are now the largest independent research provider with a team of over 200 global equity and manager research analysts spread throughout the globe. Our analyst's provide independent perspective on every security we cover, as well as unique thought leadership to help investors, again, make better decisions to reach their financial goals. 

[Leading Independent Equity Research] 

We're going to dive a little deeper into our equity research methodology. As I mentioned, we are a leader in our global independent research, meaning that our analysts do not hold shares in any of the stocks or funds that they cover, so they really are taking a truly independent view, we will speak to managers and companies, but we do not receive any payment for our research. Our most recent methodology was launched in 2002, and simply, Morningstar believes in investing in great companies for a longer period of time. Finding these great companies is unique for Morningstar and leads to our economic moat framework. We'll spend more time on our economic moats, but similar to how a moat around a castle can protect it from its enemies, economic moats are simply a business's competitive advantage that allow it to outperform and fend off its competitors. 

To give you a better sense of our research team, some numbers here on the slide, just to give you an idea of the breadth, depth, and quality of our research, by the numbers, we have about 110 equity analysts around the globe. Most are located here in our headquarters in Chicago, but we also have analysts in Europe, Asia, and Australia covering just over 1,500 companies with each analyst covering about 15 to 20 companies each. This allows our analysts to provide a deep dive fundamental analysis on each company sector and industry that they're covering, but more importantly allows our analysts to publish timely research. At a minimum, our analysts will post four company reports a year, usually coinciding with quarterly earnings. 

But the average is typically about seven to eight reports a year as they're constantly filing their companies and updating their models and analysis as market events occur. Such market events could be new product launches, for example, if Apple launches a new iPhone, a CEO changes, or regulation announcements that could impact the business. 

Some interesting notes here if you could see the 40 media quotes per day, this just really shows that, you know, within the industry, the media is quoting our analysts, you know, we're well-respected within the industry, and in fact, we've had 13 Wall Street Journal Best on the Street Analysts Awards. So we're extremely proud of our research team and the quality research that they provide. 

[Morningstar Equity Research: Global Analyst Team] 

As I mentioned, of our over 100 analysts and the 1,500 global companies that we cover, one thing that's unique about Morningstar is that we have a one single methodology globally. So regardless if we're looking at a healthcare company or financial company or utility company, we're going to follow that same methodology throughout. 

This not only allows our analysts across the globe to collaborate and talk about trends that are going on, but it's that consistency that really helps. It's very unique, other research providers, you know, maybe covering, you know, different stocks across different sectors and maybe using different models, and so you're not necessary getting that consistency, but at Morningstar we really do feel that having one consistent methodology globally is great for investors.

[Morningstar Equity Research: Research Methodology]

Now we dive a little deeper into our equity research methodology, it really does start with the bottom up fundamental analysis. We want our analysts to take a deep dive into the companies they cover, as well as the industries and the sectors they're in. Analysts are reviewing financial statements, they're visiting with managers of the companies they cover, they'll go on site and view their operations, and then they'll research the industries they're in as well. Within this fundamental analysis approach is where our economic moat analysis takes place. 

As I mentioned earlier, economic moat plays a key role in our methodology. For every company that we cover, we'll assign either a wide, narrow or no moat rating. Essentially does the company have a sustainable competitive advantage? This is a rigorous process that involves an entire committee, so we don't assign these ratings lightly. In this financial analysis, we'll also assign a financial health of the company, stewardship grade, stewardship is essentially how is management creating shareholder value, as well as a moat trend, so when we assign a wide, narrow or no moat, is that moat strengthening, weakening, or is it stable? 

All of these pillars go into our fundamental analysis which leads the next step in our process which is the valuation. At this point, our analysts are using a proprietary discounted cash flow model to determine the valuation of each company. It's here where we determine the fair valve estimate or essentially what we believe each share of the company is worth. 

Again, this is unique to Morningstar, and it may be different from some other research providers, the fair value estimate is not a target price or where we expect the stock to be trading in 6 or 12 months, but it's what we expect or what we believe the company is fairly valued at based on our discounted cash flow model at the fundamental analysis that's taking place thus far. 

Once we determine that fair value estimate, we layer on our margin of safety or also known as the uncertainty rating. The uncertainty rating indicates how confident we are predicting the future cash flows that feed into that fair value estimate. The lower the uncertainty, the more confident we are. It's here that we calculate the market price to fair value or the price to fair value essentially taking the market price at what that stock is trading divided by the fair value that gives you a nice ratio. 

A ratio of one is going to mean that that stock is fairly valued in our minds. This is actually calculated each day after market close. Using this formula, we get to the Morningstar rating for stocks which indicates, if we think the company's undervalued, fairly valued or overvalued, and can be used as a recommendation as a buy, sell or hold, and we'll get in that a little bit here. 

[Equity Research Ratings] 

I mentioned that we had a formula and determine that star rating, so not only do we use that in the price to fair value, but we also use that uncertainty. And this slide depicts how we actually get to a one, two, three, four, or five star rating. So again, it's the price to fair value adjusted for that uncertainty rating. A good example would be a company that we have assigned a $100 fair value estimate and a low uncertainty rating. As you can see that stock would need to be trading at at least a 20% discount or at least $80 or below to be given a five-star rating. 

Conversely, if that same stock was trading at a 25% premium to our fair value estimate or at $125 or higher, then it would be given a one star rating. Another example is a company that's, again, $100 fair value estimate, but a high uncertainty rating. As you can see those percentages, we could provide a greater margin of safety before we would assign those stars. 

So again, that same $100 fair value estimate but to be given a five star rating would need to be trading at at least a 40% discount or $60 or below to get a five-star, and for a one star it would need to be trading at a 55% premium or $155 or higher to be given a one star rating. A one or two-star rating implies that the company is overvalued. A three-star rating implies a company is fairly valued, and a four or five-star rating means that the company is undervalued. And our analysts are focusing on valuing the company in order to find solid businesses. 

Market price then tells us when it's a good time to buy, sell, or hold that particular security. So again, we're not necessarily using target prices, but we're trying to value that company and then let the market determine when we should buy, sell, or hold. 

[Morningstar Equity Research: Morningstar® Economic Moat™ Rating] 

I mentioned moats earlier and how the economic moat framework is really fundamental to our business. We actually borrowed this from Warren Buffett, if any are familiar with him, he invests in high quality companies and tends to hold onto them for long periods of time as they create value 10, 20 years on down the road. 

So our economic moat framework, is made up of basically five sources of moats or, again, sustainable competitive advantages. Morningstar expects firms with wider moats will be able to produce excess profits over a longer period of time and thus that's going to create more value as an investor. Wide moat companies are those in which we have very high confidence that excess returns will remain for at least 10 years and more likely than not to remain for at least 20 years. 

Narrow moat companies are those that we believe are likely not to achieve normalized excess returns for at least the next 10 years, and no moat companies, we expect to see their normalized returns gravitate towards the firms cost of capital more quickly than companies with moats. 

So a no moat company is going to be more susceptible to competition, you know, new firms are going to come in, and their profits therefore are going to decrease. As you can see here on the slide and as I mentioned that the five moat sources, it is very possible that the company doesn't have any moat source and it's very possible it could have multiple sources. So going through the five-moat sources in a bit more detail, first, we have intangible assets. These are going to include brands, patents, or government licenses that keep competition at bay. 

A great example of a firm with a tangible asset moat source would be Coca-Cola. I think we'd all agree it's brand speaks volumes, even though its main product, soda or pop, is very simply just sugar water, but people are more inclined to pay a premium for that product versus maybe a store-brand. The next is switching costs. It is pretty self-explanatory, but these are the costs it takes to change from one product to another, very commonly we see this with technology companies, for example, Oracle would be a great example. 

For a company to change from Oracle to another provider could cost that firm millions of dollars, not to mention the risk that it could put on the business if it changed and it could disrupt. So Oracle then, we believe, has a nice wide moat at least on the switching costs source. Network effect, this occurs when the value of a good or service increases for both new and existing users as more people use it. 

Great example of a network effect would be Master Card. It has a huge network, in that many individuals have a Master Card debit or credit card, and then many merchants accept Master Card. So it benefits both, as more people get it, more merchants, so on and so forth. Cost advantage is our next moat source, and this is going to be when firms have the ability to provide goods or services at a lower cost and then they can undercut their competitors on price. A great example of a cost advantage firm would be UPS. It has a massive ground shipping network and it's able to ship goods and packages at a much cheaper cost than other firms so it's less likely for a new firm to come in to try and steal those profits. And the last moat source is efficient scale. This describes a market that is limited in size and it's effectively served by one or few companies. 

A good example of efficient scale will be railroad companies such as Canadian National. You're not going to see a new railroad company come in and put down new railroad tracks next to existing tracks, it's not efficient, and therefore these railroad companies really do have a moat because of that efficient scale. 

[Morningstar's Unique and Consistent 'Intrinsic Value' Approach] 

Just kind of summarizing our equity methodology here. Again, Morningstar believes a company's intrinsic worth is a result of its future cash flows and that's by placing a valuation, or fair value estimate, on the company, again, what we believe a share of a single stock is worth. We utilize that moat framework in the long term approach and let the market determine when the stock is undervalued, overvalued, or fairly valued. And then this has led to better investor outcomes. 

[Equity Research Report] 

So now that we do all this research, analysis, moat framework, evaluation, provide a star rating, what does this mean? Basically it culminates in our equity research report which we will find on Investor's Edge shortly. This is just a brief screenshot just to give you an idea of what it looks like, and we'll go in greater detail on where you can find this in just a bit. 

[Putting the Research to Work] 

Our research also allows us to kind of put that research to work. So not only do we create reports we have thought leadership that provides us videos and we're able to really expand not only sectors and industries, but we really are able to be thought leaders in all the research that we provide. 

[Improving Investor Outcomes with Morningstar Rating: Evolution - ETF Analyst Ratings] 

We're now going to switch gears a little bit over to our manager research and more specifically our ETF analyst research. So we're going to switch gears, we were in equities, now we're going to be manage investments or exchange traded funds. So this slide just kind of shows the quick evolution of Morningstar's ratings for ETFs. The original star rating which some of you may be familiar with, but not to be confused with the star rating for stocks, is a backwards looking rating that's based on the risk adjusted returns given a peer group in its category. So there's a 3, 5, 10 and overall star rating for ETFs. 

As we evolved we created the analyst research forward looking analyst rating for mutual funds in 2011, and then launched the same for ETFs just a few years back. The analyst rating is based on the analyst's conviction in the funds ability to outperform its peer group and/or its relevant benchmark on a risk adjusted basis over the long term. If a fund receives a positive rating of gold, silver, or bronze, that means the Morningstar analysts think highly of that fund and expects to outperform over full market cycle of at least five years. The analyst rating is not a market call, and it's not meant to replace the due diligence process, but again, it's trying to give you that forward looking, as another gauge, to make the right investment choice. 

[Manager Research: Five Pillars of the Morningstar Analyst Rating] 

To arrive at the gold, silver, bronze, neutral or negative rating, our analysts use a five-pillar framework. So that five pillars are the five Ps as we like to call them, are people, process, parent, performance, and price. For people, our analysts are really looking at who's managing the fund, what's the quality of that management team and the experience of those managers. Have they been around for a while, do they have a nice track record or are they more new, if there are sub-advisors, they'll take that into account as well. 

The process pillar is how is the fund or, how are these managers arriving at their security and portfolio selection. Is there a rigorous process, evaluation process, how is the index constructed? So they're really looking at that piece. The parent, that's going to be the firm that basically is the the fund company. So for example, Fidelity or BlackRock and iShares. Are they investing in their products and their people? Are they good stewards? Performance, pretty self-explanatory, but it's what is the reason for its performance? Is it luck or is there a reason for it? And how has it performed and how will it perform going forward? 

And the last pillar is the price pillar and that's really what is the cost to own? So we're really looking at the expense ratio. We really found that the lower the expense ratio, the more money that investors keep and the better outcomes they have over the long term. So we analyze each of these pillars and then roll that up to arrive at the analyst rating, again, of gold, silver, bronze those are going to be our highest convictions with gold being the highest, neutral, really no conviction and negative is pretty self-explanatory that we don't have very much confidence in that fund going forward. 

[Report: Morningstar ETF Research] 

Again, the "so what?" That culminates into our ETF analyst research report. Again, this is the quick screenshot, we'll go into that in greater detail, but this has a wealth of information, it has the ratings, our analysis, and then data covering the performance operations and portfolio data points that relate to the fund. 

[Disclosures] 

Okay, so right now, a couple more slides, I did just want to put up this disclosure slide just to make you aware, again, we are a wholly-owned subsidiary, Morningstar Research Services is a wholly-owned subsidiary of Morningstar Inc. 

[Appendix] 

And then one quick last appendix slide here...

[Morningstar Equity Research: Comprehensive Equity Coverage] 

Again, just to give you a kind of idea of the coverage of our Morningstar Equity Research, so again switching back to the equity piece. As you can see there, we cover currently over 1,500 companies, we have global coverage on CIBC Investor's Edge. We have both US and Canadian coverage available. You can also see that we have the large cap, mid cap, and small cap, and then we have all of the sectors available there too. So with that, we can go ahead and transition here, we can show you exactly where on Investor's Edge that you can find this valuable research and reports. 

[Host:] 

Okay, so let's give Eric some time to log into his demo screen so he can share his screen with us and we can learn more from what's available on our ETF Center, and this would be available on our Investor's Edge website under the Resource tab. So it shouldn't take very long. 

[Speaker:] 

All right, so hopefully everyone can see my screen. So I've logged into the CIBC Investor's Edge, and really the couple main ways that you can access this research is by going to the Quotes and Research tab here. And from here, if we go to, oh, right away you can enter a symbol. So we have both Canadian and US companies here. For example, if I wanted to look at Royal Bank of Canada, the share trading on the TSX exchange, I can open that up. We can see we have a wealth of information here. 

On the Reports tab is where the research is really going to be found. CIBC definitely has a lot of research available to you. The main ones, I wanted to point out to you, so the Morningstar Analyst Report is what we kind of just covered there. And so here is the... This is the main report. Let me see if I can make this bigger so everyone can kind of see. This is our analysts report. You can see we have the rating up here on the left, we have the last price, the fair value estimate, price to fair value ratio, and then we include, you know, the other data points, the industry, the stewardship. 

Here we have our pillars that went into the fundamental analysis, so economic moat. So for Royal Bank of Canada for example, in most places, it's a wide moat and again, we believe it's fairly valued based on its price to fair value. We have a medium uncertainty so that bands, if you recall it, we're looking at with that graph for the low, medium, high, very high and extreme. And then we get into the, you know, the meat of the report. 

We have the investment thesis which is going to be our analyst's basically overall take on the company. On the left-hand side we have a Bull Say, Bear Say. A lot of users find this very helpful, just kind of three bullets of each. You know, again, Bull and Bear take. Our Analyst Note is going to be the most recent update. 

So for example, if there was a, you know, market event that occurred, it may not change their valuation or change any of their theses, but it may prompt them that they've considered it and it doesn't have an impact or it does, and this is why. You also have a section on the economic moat, so not only do we assign a wide, narrow, a no moat, we're going to go in-depth and analyze why we believe that's the case. We have some information on close competitors. And then as you see here, we talk about risk, evaluation, so how did we arrive at our fair value estimate, we kind of do a dive into that. 

We talk about the management of the stewardship again. And then we have an archive of the analyst notes. So notes that occurred, if there was a note from three months ago, we're going to just allow you to kind of jump back to it and take a look at that. If you do keep scrolling down here, I think it's also interesting to point out... And one thing I didn't really cover, but I think it is very valuable and I do want to touch on here is as you scroll down, we have a lot more financial data here. So you can kind of, I'll make this maybe a little bit bigger, and you can see we have a star rating here with the Q. This is actually our quantitative evaluation. So in addition to the qualitative work that our analysts do, we've actually created a quantitative model replicating what our analysts have done.

So we've kind of used a random force quantitative modeling framework which essentially a huge decision tree that looks at various data points and is trying to mimic what an analyst would do based on regression testing and back testing. So it's very interesting, it's kind of nice to look when you have both a quantitative and a qualitative view because obviously, the quantitative isn't going to take in the facts that a human would get by talking to management by researching the industry, but it is nice to compare those. But another great thing about the quantitative piece is that, again, we cover 1,500 companies globally from an analyst perspective. 

The quantitative rating has allowed us to provide a rating for almost 50,000 companies globally. So it's a great compliment, and it does provide kind of that rating for almost all stocks in the universe. And so in this report here, again, you have tons of information, valuation, profitability, you have your financials, et cetera. Back on the screen here, you can also see we have the source here, we have the Morningstar quant report, so this is just going to be the quantitative report. 

The Morningstar analysts report is going to be the qualitative, and at the back of that you're going to have your quant. So if I opened up this quant report here, you can see it's the same report that we are just looking at with an updated date. If I go to the ETF Center now, real quick, so we can switch gears here. I can go ahead and I can put in a stock ticker and I believe XIU... Here we go. So this is a Canadian ETF. Again, we have coverage on Canadian and US ETFs. 

And again, we have a wealth of information, different tabs, if we go to the Reports tab here, this is going to take you to Morningstar Analyst Report. If we go ahead and open that report up, I can make this a little bigger here, and we can see that the report in a bit more detail. So this has a wealth of information, graphics, and data that Morningstar is really known for. 

I mentioned that that Morningstar rating for the ETF, the star rating for ETFs, at the beginning that was the first kind of evolution. Again, this is the backwards looking rating based on kind of funds in its category, and then here is the analyst's ratings, so that's that gold, silver, bronze, neutral, and negative here. As we scroll down in, again, you have total returns, flows, our Morningstar Take, the pillars, so we'll have a rating for each of the five Ps. 

So in this case, these are all positive and we kind of go into the details on how we arrive to that. So we have fundamental view, a wealth of data, and charts and graphs to help with your analysis, portfolio construction here. Top 10 holdings is always nice to know exactly what that ETF is holding and the percentage of its holding and then again, we get into the fees like what are the expenses for that ETF. 

Another way to access the research is by going to Analyst Reports. So we've got our Analyst Reports link here. We go into Equities, and then you have a variety of reports here. And Investor's Edge again has provided their users with a lot of different sources. For Morningstar, if you do this dropdown here and select the Morningstar, and you can select the time period as well. 

So right now, we're just looking at the newest reports. And again, we can click on any of these reports. It's going to open up that analyst report for you and again, you can then read through this as needed. If you want it to look at more of historical, you can look, today, two days, all the way up to a year ago to see all of the reports that are available there. That's going to conclude the demo portion of this right now, and I think we're going go ahead and transition into some Q&A. 

[Q&A] [Host:] 

Thank you, Eric. That was an amazing presentation, very informative and there is so much of information out there, so we encourage our clients to take advantage of it. So while Eric is reviewing some of the questions, I wanted the audience who joined in later to know, you can type in your questions in the Q&A panel located in the right-hand side of your screen. And if you wish to listen this webinar again, a link will be emailed to anyone that registered. 

Also, I would like to request the audience to ask questions that are most explicit to today's topic and to avoid asking any questions that are specific to a security or company. So we have some questions coming in now. Let me pass this on to Eric. Maybe I could help you with the first question I see there, "So if a stock is rated three stars..." the question is, "Should I purchase the stock?" 

[Speaker:] 

Yeah, that's a great question. So again, if you recall a one and two-star, we believe that the stock is overvalued. Three-star, we believe it's fairly valued, and four and five stars, we believe it's undervalued. So again, the fairly valued means that the market price compared to the fair value estimate, within that given degree of or margin of safety based on the uncertainty rating. Basically, again, it means it's typically, you could almost equate that to a hold, but it doesn't necessarily mean don't buy. 

There's a lot of other factors, the star rating is kind of just one lens to take a look at. Another way to look at that would be to look at the moat of the company, is it a wide moat firm? Wide moat firms, again, we expect excess profits, at least 10 years up to 20 years, so they're going to be a lot more stable. And you can also look at the uncertainty value. If it's a low or medium uncertainty, it means we're more confident in that fair value estimate. Okay. Sorry, there's a couple other, I mean, it's going to depend on investor needs. Obviously, if the stock is paying a dividend and that's what you're looking for for your portfolio, that's another thing you need to take into account. 

[Host:] 

Okay. Another question we have is, "How many Canadian stocks are covered by Morningstar?" 

[Speaker:]

It's a great question. So currently, there are, I believe, 75 Canadian stocks currently covered by Morningstar. 

[Host:] 

Okay. So we have Renju Joseph asking, "Do you have any reports on the top 10 performing ETFs or equities?" 

[Speaker:] 

So top 10 is, I mean, I think it depends on how you're looking at it. Again, for our ETF coverage, we tend to look at those or cover those that have the most AUM, obviously that's where the flows or that's where investors money is at, and so we want to make sure that we're covering those because we believe those are most relevant to investors. 

For equities, we take a look, again, we cover small, mid, and large cap. We cover across sectors, so we don't necessarily look at a stock that's just performing well in the short term, we're kind of taking a look at companies that, you know, a lot of companies have been around for a while, General Electric for example is still one of ours in coverage. 

You know, a lot of the blue chippers right now obviously, Amazon, Facebook, Apple, those are covered. So we don't necessary break it down by top 10 based on performance. We kind of look at the market overall and take a look at what's going to provide the most value to the investor. 

[Host:] 

Okay. Another question we have here is, "How often do analysts update their reports?" 

[Speaker:] 

Yeah. Great question. So I kind of touched on this earlier. For the equity reports, again, it's going to be a minimum of four times a year, that's going to coincide with the quarterly earnings, but it's more... our analysis has showed it's more around seven or eight times a year. Our analysts are deeply ingrained in the companies that they're following, they're following them every day, any news cycle or market event that could affect them, they are constantly looking at their evaluation model and updating that accordingly. And so they end up updating about seven to eight times a year. 

For the Analyst's Report, the ETF, it's going to be a minimum of once a year. Again, we do take a look at market events. For example if a major ETF had a manager leave the firm or promptly retire, or what have you, or if there is major events in the economy we'll take that into account and we'll update our analysis accordingly. 

[Host:] 

Okay. David here would like to know, "Does Morningstar measure volatility and risks?" 

[Speaker:] 

Volatility and risk. So we do have some data points on that. Again, the uncertainty rating is probably going to be one of your better indicators of that. Again, if it's a low or medium uncertainty where we're pretty confident in that valuation, there are a few firms that have an extreme uncertainty value, and then the very high as well. Trying to think off hand without looking at the data, I know we have various data points for risk. We don't necessarily have an analyst defined data point for risk, but there is definitely fundamental data points, calculations, from the fundamental financial statements that we do utilize in there. 

[Host:] 

Okay. Another good question here is, "Is fair value the same as price target?" 

[Speaker:] 

Okay, great, another great question. So, again, Morningstar is very unique in how we... In kind of our research methodology, I kind of touched on this earlier. The fair value estimate is not a price target. The fair value estimate is a valuation of what we believe one share of that stock is worth. And again, that takes into account, the fundamental analysis, our moat evaluation, a moat rating, the moat trend, and the stewardship. And then we take a look at that, plug that into our discounted cash flow model, and then that gives us a fair value estimate that we believe a share is worth today, and then we let the market price help us determine when it's a good time to buy, hold, or sell. 

[Host:] 

Okay. Lilly here has a question, "What is the criteria for Morningstar to select companies to cover?" 

[Speaker:] 

So I started touching on that a little bit earlier. So again, we want to make sure that we have the breadth and the depth of research, we do cover all the sectors globally, as well as all of the market caps. In terms of specifically what makes us determine to cover company A versus company B, I'm actually going to have to take that one maybe offline and touch base with our analyst to give you a better answer, but we do take a global look at that because we do want to cover as much as we can with our 100 plus analysts. 

[Host:] 

Okay. Okay. So I guess that's all the questions we have for today here, Eric. Is there anything else you would like to touch on before we end today's session? 

[Speaker:] 

No, I think that would be it. I'd love to get that follow up question to you so we can follow up offline and we can get that to get that to the user. 

[Host:] 

Yeah, absolutely. Absolutely, yes. Thanks again, Eric. It looks like that was a very good presentation. I'm sure I speak on behalf of all the audience that we thoroughly enjoyed listening to your insight. Thank you for such a great presentation and the demo. It was very informative. 

On behalf of CIBC Investor's Edge, I would like to thank the audience, we really appreciate you being here. Should you have any more questions or comments, please visit the Investor's Edge website or please feel free to get in touch with us by phone, chat or email. Thank you for joining us today, and we will see you next time. 

[Speaker:] 

Great. Thank you, everyone, have a great day.

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