Comparing Value LineWith Morningstar “Stars”ratingWhich is more important? The “stars” or the timeliness ranking?

Comparing Value Line and Morningstar

In this session we will look at both the Morningstar and Value Line databases.

We will compare the findings of one data base with the other.

.

Comparing Value Line and Morningstar

On the surface, the two databases look a lot alike. Each has sections for stocks, mutual funds, and ETF’s.

Each has a ranking system. Value line uses a one through five system with one being the best and five the worst. Morningstar uses a star ranking that has five the best to one the worst to help users choose stocks.

Comparing Value Line and Morningstar

The library’s subscriptions in both services compare well to each other in most areas of coverage. However, the Morningstar subscription also coverers ETS, while our Value line subscription does not.

Comparing Value Line and Morningstar

The Value Line service has several different categories of rankings on the one to five scale. These are:

1. Highest approximately 100 stocks 2. Above Average approximately 300

stocks 3. Average approximately 900 stocks 4. Below Average approximately 300

stocks 5. Lowest approximately 100 stocks

Comparing Value Line and Morningstar

Morningstar on the other hand uses a “star” system.

The “stars” correspond to the expected rate of return for the investor in the financial instrument.

5 star, a rate of return greater than cost of the stock.

4 star, above average rate of return 3 star average return 2 star below average return 1 star, the stock is expected to loose money

Note that the rating system is the reverse of that used by Value Line, i.e. one is highest and five lowest

Comparing Value Line and Morningstar contd.

We will rank the portfolios that each has on their sites by the ranking that the other uses.

Morningstar by Value Line’s timeliness rank.

Value Line by Morningstar’s “star” ranking system.

The results may surprise you!

Portfolio One

This portfolio is for those who are termed “aggressive” investors. It is one that Value Line thinks will have a good chance to have substantial appreciation over the next12 months. There is risk involved in this portfolio as well as any of the others.

Note that this portfolio like all portfolios is subject to change due to market conditions and the financial stability of each company. This portfolio was current as of the date of inception, which was February 13, 2012.We will follow these portfolios over time to see which, if any actually make a profit.Also note that in all likely hood, our results would be better if we daily monitored these stocks. Or if we took protective measures like stop losses which are written at a certain percentage like 3% up to say 6% of the amount invested. We should always try and make sure we have some way to get our funds out of the market if the trade turns against us.

Results for Portfolio One by Star groups

Four Stars Three Stars Two Stars 0 StarsAAPL AAP DTV CSTRNSC BLL FL DANTEVA MIICF GCO HELE

PVH KEX KMT TKR ODFL MAT TGI

%Ret % Ret %Ret %Ret17.33 6.85 7.70 6.07

Portfolio Two

For the moderate investor, includes stocks that will provide above-average income and whose prices have the potential to increase. Typically, more conservative investors will be most comfortable with this portfolio.

Portfolio Two

List of stocks from this portfolio. These are intended for income and potential price appreciation.Four Stars Three Stars Two Stars One StarABT KO LMT MOLXCVX CL WMTCOP DDRSG EMRSNY HONSNA INTCUPN KFT MCD UPS VZ

Results for Portfolio Two by Star Ranking

Four Stars Three Stars Two Stars One StarABT KO LMT MOLXCVX CL WMTCOP DDRSG EMRSNY HONSNA INTCUPN KFT MCD UPS VZ %Return % Return %Return %Return 2.24 2.29 1.28 3.41

Portfolio Three

Emphasizes stocks with worthwhile appreciation potential. It is most appropriate for investors focused on long-term capital gains.

Portfolio Three Stocks

Stocks in this list with Morningstar ranking.Five Stars Four Stars Three Stars Two Stars 0 StarsHAL GES AFL HOG CBOU JNJ CVS HRL DY MOS DIS ESL NOV MGA PEP XLNX X CELG UNH GOOG

Portfolio Three Results

Five Stars Four Stars Three Stars Two Stars 0 Stars HAL GES AFL HOG CBOU JNJ CVS HRL

DY MOS DIS ESL NOV MGA PEP XLNX X CELG UNH GOOG% ret %ret %ret %ret %ret-10.48 +4.53 +5.56 +5.17 +9.53

Portfolio Four

Focuses on stocks with above-average dividend yields. Investors with an interest in current income are likely to find interest here.

Portfolio Four Stocks

Here are the stocks in this portfolio with the Morningstar Star rank.Four Stars Three Stars Two Stars 0 StarsABT LNT BT ALRPRDS.A DD BTI LG

HNZ ED TA.TO IP OGE WPC MCD RAI NOC SO POR SLE

Results for Portfolio Four

These are cumulative results for this portfolio assuming we had purchased even amounts of stock up to a maximum of ten stocks with even amounts in each stock up to a maximum of 100 shares for each stock..

Results for Portfolio Four

Four Stars Three Stars Two Stars 0 StarsABT LNT BTARLPRDS.A DD BTI LG

HNZ EDWPC

IP OGEMCD RAI

NOC SO POR SLE%Ret %Ret %Ret %Ret3.13 1.15 2.33 -5.86

What have we learned?

Stars are useful, up to a point.

The Value Line timeliness may be a better indicator of future stock growth potential.Note that it is only useful for a usually limited period of time. The user will need to set stops and check at least weekly to determine if your investment goals for the stock have been met.

We will still need to set “stops” so no matter what the market does we will still be able to preserve our capital.

Morningstar Results The Hare Portfolio Ranked by Value Line Timeliness Rank

Ranked One Ranked Two Ranked Three Ranked Four Ranked Five UnrankedDFS 3star ZMH 4star CMP 4 star Payx 4 star CX 4 star CSCO 4 star STRA 3 star JOE 5 star MSFT 4 star EBAY 4star KMX 3 star AMGN 3 star ADSK 3 star CME 3 star NOV 4 star ISCA 3 star ORCL 5 star WU 5 star IGT 4 stars

Morningstar Results The Hare Portfolio Ranked by Value Line Timeliness RankRate of Return

Ranked 1 Ranked 2 Ranked 3 Ranked 4 Ranked 5DFS 3star ZMH 4star CMP 4 star PAYX 4 star CX 4 star CSCO 4 star STRA 3 star JOE 5 star MSFT 4 star EBAY 4star KMX 3 star AMGN 3 star ADSK 3 star CME 3 star NOV 4 star ISCA 3 star ORCL 5 star WU 5 star IGT 4 stars One Two Three Four Five +15.17% +2.46% -3% +11.00 -8.64%

Comparing Value Line and Morningstar

We have ranked Value Line by Morningstar. We have also looked at the Value Line portfolios listed by the “stars” system.

It would appear that the factor of timeliness, at least in the short run is a reasonably good indicator for the potential for stock growth.