Morningstar :- People seem to look at them as a benckmark in assessing individual companies which isn't necessarily a good way to look at them. Essentially, they rate FUNDS. If you look them up in Investopedia, their system is quoted as being "full of holes". From a Morningstar acknowledgement :- The Bottom Line "Morningstar acknowledges its rating system is a quantitative measure of a fund's past performance that is not intended to accurately predict future performance. Instead, the company recommends investors use the rating system to evaluate a fund's track record compared to its peers. It can be the first step in a multi-step process investors can employ to analyze funds before making a purchase."
At the end of the day, they're just a tool which has flaws, it assesses a fund's historical performance. One fund provider called Vanguard did a study on Morningstar in 2013 (yup, that's a while ago alright) and one of the findings they came up with is.. "The Vanguard study produced two critical findings, the first being an investor had a less than a 50-50 shot of picking a fund that would outperform regardless of its rating at the time of selection".
So if they have this kind of accuracy with rating a particular fund, what faith can one have in their system picking out individualcompanies for being either under or over valued ?
Imo, much, much better to dyor and not romance yourself on one rating institution which isn't particularly relevant anyway to specifically individual companies, especially those which don't have much/anything to show for historical earnings.
There ya go, hope that's a bit of useful comment / opinion
Glah, AE
ZLD Price at posting:
$2.21 Sentiment: Hold Disclosure: Held
