Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice! As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.
In the midst of this market 'meltdown', it is still business as usual on this blog. My portfolio investment strategy is kicking in as it has been for the last several weeks. As stocks decline, if they reach sale points they are sold and not replaced. I am now down to 9 positions and could conceivably drop to 5 positions (my minimum) well below the maximum of 5 positions.
I have attempted to accomplish several things on this blog simultaneously. For one, I have been listing many investment 'ideas' that I would find suitable for purchase. In addition, I have outlined my own ideas of portfolio management with targeted buys and sales and utilizing portfolio-generated signals to determine when to be buying or selling positions. Finally, I have been working hard in the name of transparency to share with you my thoughts on my own actual holdings. Now with my participation on Covestor, you all can monitor my activities virtually real-time without my needing even to blog.
On December 23, 2007, I reviewed my holding in IHS (IHS). Going alphabetically through my shortened list of holdings, brings me to Morningstar (MORN). Besides utilizing Morningstar.com for much of my own research in this blog, I also own a small position in my trading account! I currently own 103 shares of Morningstar (MORN) which were purchased 11/22/05 at a cost basis of $32.57. Morningstar closed at $62.20 on January 18, 2008, for an unrealized gain of $29.63 or 91.0% since purchase.
I have sold portions of Morningstar four times already. I sold 33 shares on 2/16/06 at a price of $42.94, representing a gain of $10.37 or 31.8%. Next I sold 27 shares of MORN at $51.91 on 2/22/07 for a gain of $19.34 or 59.4%, 20 shares of MORN were sold on 8/6/07 at $62.06, representing a gain of $29.49 or 90.5% since purchase. Finally, I sold 17 shares of MORN on 10/10/07 at a price of $71.25, representing a gain of $38.68 or 118.8% since purchase.
These sales demonstrate my current strategy of selling portions of a holding (currently 1/7th of my remaining shares) at targeted sale points of 30, 60, 90, and 120% appreciation points.
What does the chart look like?
Let's take a look at the "point & figure" chart on Morningstar (MORN) from StockCharts.com:
As you can see Morningstar (MORN) has come under considerable selling pressure since the first of the year as the stock dipped from a high of $85 in December, 2007, to its current price of $62.20. I think the sales of portions of Morningstar may well make more sense now in the face of the correction we are facing! The stock appears from this view to be well above the support area in terms of the long-term stock performance.
When do I plan to sell Morningstar next?
As you probably know, I have two points at which I sell a stock. On the upside I sell 1/7th of my remaining shares as a stock advances to targeted appreciation levels which I have arbitrarily set at 30, 60, 90, 120, then 180, 240, 300, 360, then 450% etc. appreciation points. Since I have already sold a portion of Morningstar four times with the last sale at the 120% level, my next level of sale would be 1/7th of my remaining shares at a 180% level of appreciation. This works out to 103/7 or 14 shares if the stock should appreciate to 2.80 x $32.57 = $91.20.
On the downside, unless there is some fundamental negative news that leads me to sell my shares, my sale point is at 1/2 of the highest appreciation sale level. For MORN, since I sold some shares four times, with the last being at the 120% appreciation level, my sale target is at a 60% appreciation level which works out to 1.6 x $32.57 = $52.11. If Morningstar should decline another $10 from here, I shall be selling all of my remaining shares regardless of my overall outlook on the company.
How did they do in the latest quarter?
On November 1, 2007, Morningstar (MORN) reported 3rd quarter 2007 results. For the quarter ended September 30, 2007, revenue came in at $111.9 million up 36.7% from the prior year's result of $81.8 million. Consolidated operating income came in at $31.4 million up 53% from last year's $20.5 million. Net income was $19.9 million in the quarter or $.41/share compared with $13.5 million or $.29/diluted share in the same quarter last year.
The company beat expectations of $.39/share but came in slightly light on revenue which had been expected to come in at $112.5 million according to analysts polled by Thomson Financial.
How about longer-term results?
Reviewing the Morningstar.com "5-Yr Restated" financials on MORN, we can see an almost perfect report with steady revenue growth, steady earnings growth (except for a dip in 2003), fairly stable shares (about an 18% increase in shares between 2002 and 2006 during which time revenue climbed almost 200%, and earnings increased almost 1000%).
What do I think?
Well I like Morningstar a lot. I use the service in the blog and own shares. But I am prepared to sell if the stock should decline to a sale point as I have established. The latest quarter was great, and longer-term the company looks solid. Technically, the stock has shown recent weakness along with the market. Thus, even though the fundamentals are strong, the best I can do--
MORNINGSTAR (MORN) IS RATED A HOLD
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