I agree. I don't want to get anyone offside when I say this,...

I agree. I don't want to get anyone offside when I say this, it's somewhat embarrassing how many people use Morningstar Quantitative analysis to determine a valuation. Now I saw somewhat because the law of averages is at play as well. If the majority of people are using it then the price is more than likely to go to what Morningstar has indicated. If you're the only one using it for that particular company then you'll probably lose money.

Quantitative analysis is the use of a mathematical formula to determine an outcome. It's used across a lot of different areas in business and economics. The output accuracy from any formula in quantitative analysis is really based the quality of the input.

When talking about Morningstar Quant algorithm we have to consider the input: Volume traded, trend, share price increase/decrease and over what timeframe. Using these metrics an equation calculates the theoretical share price target if the same input continues. I don't have access to the exact algorithm that is used however one could deduce that it's fairly basic. The output from the algorithm is labeled as "fair value" however it's really more like calculated price target based on current input. This is why I said it's embarrassing because people that don't realize this tend to put a lot of weight on this price.

Back to the law of averages; when a lot of novice investors are looking at this number and all believe this is the "fair value" they're a lot happier to buy right up to the price that's shown because they think it's accurate. The more the price rallies the higher the number will go and this is where this get really out of hand. I'd suggest going over to the BRN threads and having a scroll through and see how many people quote the Morningstar "fair value" price. It's crazy in my opinion.

The best approach imo is to use a mixture of quantitative analysis and qualitative analysis. This would be equivalent to technical and fundamental analysis.