Research > By the Numbers - Morningstar Advisor

Morningstar Advisor Magazine June/July 2010 Issue

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Analyst Picks are chosen by the Morningstar fund analysts who specialize in each category. Our analysts scrutinize more than 2,000 mutual funds to come up with a handful of favorites for each category. Analysts make their selections on a variety of factors, including a fund's historical risk and return, and costs on a quantitative basis. Qualitatively, we also consider consistent strategy, experienced management, and strong stewardship. Because we recognize that different funds come with different risks, each category may contain an assortment of picks that are vastly different from each other, but they will all meet the criteria listed.

Undervalued stocks with significant competitive advantages can make attractive long-term holdings. With that in mind, we scoured our 2,000-plus stock coverage universe for high-quality stocks (those boasting wide economic moats) that are trading on the cheap (rated 4 or 5 stars by our analysts).

Our analysts award wide economic moats to companies they believe possess durable competitive advantages that are likely to confer economic profits well into the future. In addition, our analysts estimate the fair value of each stock based on in-depth fundamental analysis. When a stock trades at a suitably wide discount to our estimate, we award it 4 or 5 stars. The wider the discount, the higher the star rating, and vice versa.

New sales of variable annuities slipped in the third quarter, dropping by 2% to $30.6 billion from $31.2 billion in the second quarter of 2009 and down 17.3% from third-quarter 2008 sales. Prudential led the industry with an unprecedented 19% market share and a 72.6% increase in sales relative to the second quarter. MetLife was second, with an 11.2% market share but a 23.6% decrease in sales, followed by TIAA-CREF (11.2% market share, sales down 4.4%), Jackson National (9.5% market share, sales up 29.3%), and Lincoln Financial (6.5% market share, sales up 3.7%).

The table lists the 50 most popular equity ETFs, ranked by assets under management. A Morningstar Valuation Rating of Undervalued means the ETF is trading at a significant discount to our estimate of its intrinsic worth. A rating of Overvalued means the ETF is trading at a significant premium to our fair value estimate. We rate Fairly Valued any ETF that trades in between.

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