Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 349

Morningstar: Douglass interview, 29 top picks, corona research

Hamish Douglass exclusive interview

 
Hamish Douglass sent an update to his investors on 18 March 2020, including:
 
"As you are aware, the COVID-19 virus is a fast-moving and fluid situation. The most likely outcome of the efforts to contain this health emergency is a near total shutdown of the world’s economy over the next two to six months. This is likely to lead to a near total collapse in demand for many (but not all) businesses over this period. For some, this could prove fatal, particularly for small businesses and for businesses that have high financial leverage or high fixed costs. Only governments can prevent these businesses from failing. The potential financial and social consequences are very concerning. 
 
The shape of the economic recovery will depend upon the scale, timeliness and effectiveness of actions taken by governments and central banks to help businesses to survive and keep people employed over the next two to six months...
 
Over the past week, we have taken steps to increase the defensiveness of the Global Equity portfolio and have increased cash in the strategy from approximately 6% to approximately 15%. All cash is held in US dollars."

29 quality stocks at great prices

By Mark LaMonica, Individual Investor Product Manager, Morningstar

Great companies carve out a solid competitive advantage and as coronavirus rattles markets, many such names are trading at hefty discounts. Morningstar's list of 5-star rated stocks has expanded rapidly as prices fall and now includes 29 companies.

Market shocks can be cause for anxiety but if investors have the capital, such shocks can be an opportunity to pick up the stocks of great companies at discounts.

Investors define 'great' in different ways. From Morningstar's perspective, great companies are those that have carved out solid (and in some cases growing) competitive advantages that will allow them to thrive for years to come--in Morningstar parlance, they’ve built economic moats. Such companies are typically led by adept managers who have a record of allocating capital in ways that add value.

To find such exceptional firms, we looked for the following three qualities.

1. Economic moat: First, they need to boast wide or narrow Morningstar Economic Moat Ratings. In other words, these companies have strong competitive positions.

2. Exemplary stewardship: Second, they must earn our top Morningstar Stewardship Rating—exemplary or standard. In other words, these companies are led by exceptional corporate managers who have a proven record of making investments and acquisitions supporting the competitive advantages and core businesses of their companies--and they won't pay an arm and a leg to do so. They'll divest underperforming or noncore businesses. They'll find the right balance of investing in the business and returning cash to shareholders via dividends and share repurchases. And they'll assemble a portfolio of attractive operating assets and skilled human capital, and then execute well.

3. Discounted price: And lastly, the stocks of these companies must be trading at a decent discount to our fair value estimates, selling at Morningstar Ratings of 4 or 5 stars at the of writing.

We used the Morningstar Stock Screener to look for these qualities. Only three stocks made the cut. Don't think of this as a list of 'buys' though. Instead, think of it as a collection of names to investigate further. A 5-star rating does not suggest that the stocks won't drop further. The aim is not to pick the bottom, but to highlight to investors that they can pick names up at a discount.

The three companies are: 

  • Ansell Ltd: we view Ansell as well-managed and able to deliver a consistent, growing earnings stream
  • Ryman Healthcare Ltd: We believe Ryman can roughly triple its annual revenue by the end of our 10-year forecast period, as the group expands the number and maturity of villages under its management
  • Macquarie Group Ltd: Macquarie Group is a successful global asset manager and investment bank. Its main strengths are risk management, business unit interconnectedness and an ability to evolve and adapt to changing market conditions.

Although nobody know when the market will bottom, more companies are offering value than at any time in recent years.

Click here for access to Morningstar Premium for a free four-week trial, including portfolio management services from Sharesight and detailed research on 1600 global stocks as well as 450 ETFs and Funds, including the companies Morningstar currently rates as 5-star investments.

Coronavirus: widespread disease but drug pipeline progress

Morningstar's detailed research on coronavirus concludes there will be minimal long-term economic impact, with forecast low-fatality rates. It implies the threats to the economy are overrated, although please note this paper was first published to US subscribers on 9 March 2020. Click on the image for the full free paper.

 


 

Leave a Comment:

banner

Most viewed in recent weeks

Which generation had it toughest?

Each generation believes its economic challenges were uniquely tough - but what does the data say? A closer look reveals a more nuanced, complex story behind the generational hardship debate. 

100 Aussies: seven charts on who earns, pays, and owns

The Labor government is talking up tax reform to lift Australia’s ailing economic growth. Before any changes are made, it’s important to know who pays tax, who owns assets, and how much people have in their super for retirement.

The best way to get rich and retire early

This goes through the different options including shares, property and business ownership and declares a winner, as well as outlining the mindset needed to earn enough to never have to work again.

A perfect storm for housing affordability in Australia

Everyone has a theory as to why housing in Australia is so expensive. There are a lot of different factors at play, from skewed migration patterns to banking trends and housing's status as a national obsession.

Chinese steel - building a Sydney Harbour Bridge every 10 minutes

China's steel production, equivalent to building one Sydney Harbour Bridge every 10 minutes, has driven Australia's economic growth. With China's slowdown, what does this mean for Australia's economy and investments?

Supercharging the ‘4% rule’ to ensure a richer retirement

The creator of the 4% rule for retirement withdrawals, Bill Bengen, has written a new book outlining fresh strategies to outlive your money, including holding fewer stocks in early retirement before increasing allocations.

Latest Updates

Economy

The ‘priced out generation’ and what they should do about it

A fiery interview on housing exposed deep generational divides, sparking youth outrage and political backlash. As homeownership drifts out of reach, young Australians face a choice: fight the system - or redefine success.

Taxation

Maybe it’s time to consider taxing the family home

Australia could unlock smarter investment and greater equity by reforming housing tax concessions. Rethinking exemptions on the family home could benefit most Australians, especially renters and owners of modest homes.

Superannuation

Meg on SMSFs: Ageing and its financial challenges

Ageing SMSF members can face issues funding their pension income as cash reserves dwindle. Potential solutions include involving adult children in contributions to secure future financial stability.

Economy

US earnings season was almost too good to be true

The second quarter US earnings season has wrapped up, with a record 82% of S&P 500 firms beating earnings estimates. As tailwinds fade, Q3 may reveal whether AI momentum can offset rising economic headwinds. 

Gold

Does gold still deserve a place in a diversified portfolio?

9,000 years and no devaluations later, gold is the world’s most enduring store of value. It remains attractive as the value of several paper currencies, including the US dollar, are threatened by deficits and rising debt.

Shares

Checking in on the equity market's silent engine

Consumer spending directly impacts corporate earnings, sector performance and market sentiment. The latest data from different economies uncover risks and pockets of opportunity for investors.

Fixed interest

6 key themes driving bond markets

The Fed could soon be prompted to join other central banks in cutting interest rates. This would have ripple effects across global fixed income markets and provide an especially attractive backdrop for emerging market bonds.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.