Date of Completion
Honors Thesis - Campus Access
The evaluation of stock selections by portfolio managers is a topic commonly addressed by academics in finance. In particular, there is great interest to find portfolio managers that consistently outperform the market. In this article, we evaluate the market returns of Morningstar’s “StockInvestor” Wide Moat portfolios: The Tortoise and the Hare. The Wide Moat portfolio stocks are companies that Morningstar analysts identify as having a sustainable advantage estimated to last at least 20 years. Comprised of these Wide Moat Stocks, the Tortoise portfolio is comprised of slow and steady growth stocks while the Hare portfolio is comprised of stocks with faster, but less steady growth. While portfolio returns are typically compared to the overall market index, this basic comparison ignores statistical factors in stocks that have been shown to produce above-average returns. This study evaluates Morningstar’s portfolios to determine if Morningstar’s portfolio managers select stocks that outperform through the business cycle, or if the returns are explained by the Fama-French 3-factor model. In this study, we analyze both portfolios from 2007 to 2012. In addition to looking at the entire period performance, this study also isolates the recessionary period from 2007 to 2009 to see if the Wide Moat portfolios outperform in a recession. Furthermore, in order to investigate what other factors may be underlying the identification and selection of wide moat stocks, an analysis is conducted to determine how industry competitiveness and concentration is reflected in the stock selection of Morningstar’s portfolio managers.
Bishkin, Zachary, "Evaluating Morningstar Wide Moat Stocks through the Business Cycle" (2019). Honors Thesis. 182.