Morningstar Investment Methodology

On looking around Morningstar’s website I came across two documents, Morningstar’s approach to equity research and their equity research methodology. They offer a great overview of how Morningstar think about company valuation and market prices.

Here is a quote from the start the document about equity research:

At Morningstar, we evaluate stocks as pieces of a business, not as pieces of paper. We think that purchasing shares of superior businesses at discounts to their intrinsic value and allowing them to compound their value over long periods of time is the surest way to create wealth in the stock market.

Key topics covered include:

  • Economic Moat
  • Discounted Cash Flow
  • Discount Rate
  • Fair Value
  • Business Risk
  • Margin of Safety
  • Consider Buying/Consider Selling
  • Stewardship Grades
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