It's amazing how much attention some people pay to stock quotes, and how little they pay to the value of the underlying businesses they are buying.
At Morningstar, we evaluate stocks as pieces of a business and not as "little wiggling things with charts attached." We believe that purchasing shares of superior businesses at discounts to their fair values, and allowing those businesses to compound value over long periods of time, is the surest way to create wealth in the stock market.
The market may not always agree with our long-term investment philosophy, so sometimes our recommendations are out of step with consensus thinking. When stocks are high and richly valued, relatively few will receive the highest Morningstar Rating of 5 stars. But when the market tumbles, there will be many more 5-star stocks. We think good companies are more attractive when they are cheap than when they are expensive, so we find fewer opportunities when the market is overheating. If we wait to buy clothes and flat-panel televisions until they go on sale, why shouldn't we also purchase stocks at bargain prices?
Morningstar has been analyzing investment strategies for nearly 20 years, and we have become experts at separating successful styles from the mediocre majority. In this lesson, we will share our approach to rating stocks so that you have an opportunity to benefit from our investment strategy and build enduring wealth in the market.
What Is Fair Value? >>