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

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Retirement income expectations hit new highs

Younger Australians think they’ll need $100k a year in retirement - nearly double what current retirees spend. Expectations are rising fast, but are they realistic or just another case of lifestyle inflation?

5 charts every retiree must see…

Retirement can be daunting for Australians facing financial uncertainty. Understand your goals, longevity challenges, inflation impacts, market risks, and components of retirement income with these crucial charts.

Why super returns may be heading lower

Five mega trends point to risks of a more inflation prone and lower growth environment. This, along with rich market valuations, should constrain medium term superannuation returns to around 5% per annum.

The hidden property empire of Australia’s politicians

With rising home prices and falling affordability, political leaders preach reform. But asset disclosures show many are heavily invested in property - raising doubts about whose interests housing policy really protects.

Preparing for aged care

Whether for yourself or a family member, it’s never too early to start thinking about aged care. This looks at the best ways to plan ahead, as well as the changes coming to aged care from November 1 this year.

Latest Updates

Shares

Four best-ever charts for every adviser and investor

In any year since 1875, if you'd invested in the ASX, turned away and come back eight years later, your average return would be 120% with no negative periods. It's just one of the must-have stats that all investors should know.

Our experts on Jim Chalmers' super tax backdown

Labor has caved to pressure on key parts of the Division 296 tax, though also added some important nuances. Here are six experts’ views on the changes and what they mean for you.        

Superannuation

When you can withdraw your super

You can’t freely withdraw your super before 65. You need to meet certain legal conditions tied to your age, whether you’ve retired, or if you're using a transition to retirement option. 

Retirement

A national guide to concession entitlements

Navigating retirement concessions is unnecessarily complex. This outlines a new project to help older Australians find what they’re entitled to - quickly, clearly, and with less stress. 

Property

The psychology of REIT investing

Market shocks and rallies test every investor’s resolve. This explores practical strategies to stay grounded - resisting panic in downturns and FOMO in booms - while focusing on long-term returns. 

Fixed interest

Bonds are copping a bad rap

Bonds have had a tough few years and many investors are turning to other assets to diversify their portfolios. However, bonds can still play a valuable role as a source of income and risk mitigation.

Strategy

Is it time to fire the consultants?

The NSW government is cutting the use of consultants. Universities have also been criticized for relying on consultants as cover for restructuring plans. But are consultants really the problem they're made out to be?

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.