Course 402:
Morningstar's Stock Types
In this course
1 Introduction
2 Let's Make a Distinction
3 So You Want to Build a Portfolio?
4 I Own What?

Microsoft MSFT and Microtest MTST have two things in common: They're both technology companies, and they both have "micro" in their names. But that's where the similarities end. One is the most successful company of the 1990s and the largest company in Morningstar's stock database, with a market value of $450 billion at the end of 1999. The other, a struggling producer of hand-held scanners, is worth a piddling $30 million, making it the 5,933rd largest company we track. Two technology companies, two very different stocks. Inside any sector--whether it's technology or utilities--you'll find companies as different as Microsoft and Microtest. We developed Morningstar stock types, which can be found on the Morningstar Stock Report, to highlight fundamental differences between companies. We examine each company's historical record, growth rates, cash flows, and other financial data, and assign it to one of eight groups. These stock types address the question: What kind of company is this? What about Microsoft and Microtest? Bill Gates' company lands in our aggressive-growth stock type, the home of the fastest-growing companies in our database. Microtest doesn't fare so well. Because of declining cash flows and negative earnings, it's in the distressed group. Hawking handheld cable scanners hasn't generated much growth.

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