//Morningstar Runs the Numbers

Morningstar Runs the Numbers

Inspired by Harper’s Index (with a tip of the hat to FiveThirtyEight’s Significant Digits blog), Morningstar Runs the Numbers uses a numbers-based approach to highlight recent Morningstar research, along with some outside news stories.

Morningstar released our updated ratings for 529 plans, which included two upgraded plans and nine downgrades. Why did these funds get knocked down? Often it was because of fees.

As the 529 industry continues to make significant fee cuts, plans standing still on fees have become increasingly unattractive. We downgraded three of Nebraska’s plans (NEST Direct College Savings Plan, NEST Advisor College Savings Plan, and TD Ameritrade 529 College Savings Plan) and Alabama’s CollegeCounts 529 Fund Advisor Plan because they haven’t cut fees as aggressively as most peers.


$237 Billion
Steve Wendel and Michael Leung completed an analysis of 529 plan usage and found that American families are leaving $237 billion on the table by saving outside of these accounts. They suggest that work needs to be done to educate people about the benefits of 529 plans to boost their usage.

For Halloween, Susan Dziubinski looked at 10 stocks with scary valuations. One stock trading well above its fair value estimate is  Lululemon (LULU)

Shares of the athletic-wear-maker are up more than 70% this year and trade at a 76% premium to our fair value estimate. In September, we boosted the narrow-moat firm’s fair value estimate by a few dollars, after raising our near-term revenue outlook, notes analyst Sonia Vora. Indeed, there’s much to like about the company.

That being said, Morningstar pegs the company’s fair value estimate at $77–well below where shares currently trade. Expanding into men’s offerings, exploring e-commerce opportunities, and increasing its global footprint should drive overall top-line growth at a midteens rate during the next three years, says Vora. But we expect growth to slow thereafter to 4% by the end of our 10-year forecast. Given our assumptions, Vora calls the shares “substantially overvalued.”


We maintained our fair value estimate of $186 per share for  Facebook (FB) despite mixed results. Analyst Ali Mogharabi still has confidence in the firm over the long haul and thinks shares are undervalued. 

In our view, no decline in Facebook’s U.S. users was reassuring as it displayed that this wide-moat name’s network effect moat source is intact. More importantly, albeit data and content issues that have surrounded the firm this year, advertisers continue to spend on Facebook as ad loads and ad prices both increased and further drove impressive double-digit growth in revenue generated per user.


Looking for tax-loss harvesting opportunities? Christine Benz says individual stock investors will have plenty of places to look.

As of Oct. 29, 5,873 stocks in Morningstar’s database had losses of more than 10% so far this year; 639 of them were large caps. And 4,376 companies, 289 of them large caps, had posted losses over more than 20% for the year to date.


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