Frequently Asked Questions
   
 
  A - F    G - L    M - R    S - Z  
     
  A - F
     
  % Above / Below Fair Value (stocks only)  
  This is the percentage that a stock’s price is currently above or below our fair value estimate.  
     
  % Assets in Top 10 Holdings (funds only)  
  Percent assets in top 10 holdings is the aggregate assets, expressed as a percentage, of the fund’s top 10 portfolio holdings. This figure is meant to show how concentrated a fund is in its top holdings. A concentrated fund is more susceptible to market fluctuations in its top holdings and can be more volatile than its peers.  
     
  % Below 52-Week High  
  This data point reflects the percentage a stock’s current price is below its high over the past 52 weeks. A negative number means the stock is currently above its 52-week high.  
     
  5-Year Expected Return (S)  
  The 5-year expected return is the average annual return we expect for a stock over the next 5 years. This calculation assumes that a stock's price converges to its fair value in five years. Thus, if today's stock price is $25 and we expect its fair value to be $50 in 5 years, then the stock will have to appreciate 14.9% per year for 5 years to get to its fair value.  
     
  5-Year Risk-Adjusted Return (S)  
  The 5-year risk-adjusted return measures the return we think a stock will produce over the next five years beyond what's expected given its risk. This is calculated by taking the 5-year expected return and subtracting the hurdle rate. A positive risk-adjusted return is free money--you're receiving an extra return without paying for it with additional risk. In other words, the stock is being mispriced by the market.  
     
  52-Week High ($)  
  The highest stock price over the trailing 52-week period. (Intraday prices are used for the current trading day, and closing prices for the previous 52-week period.)  
     
  52-Week Low ($)  
  The lowest stock price over the trailing 52-week period. (Intraday prices are used for the current trading day, and closing prices for the previous 52-week period.)  
     
  Analysis Report Date  
  This is the last date on which a Morningstar analyst published his or her report on the holding. Analyst Reports are a Premium Membership benefit.  
     
  Analyst Pick / Pan (funds only)  
  This data point indicates whether a fund is designated as a favorite (Fund Analyst Pick) or a least-favorite (Fund Analyst Pan) of Morningstar’s in-house analyst staff. Only a handful of funds in each investment category are designated Analyst Picks or Pans. Picks and pans are an excellent way to quickly look for quality funds to consider buying and poor ones to avoid.  
     
  Annual Return  
 

Time Periods: Last five calendar years.

Represents shareholders’ gains during the stated calendar year. Total return includes both unrealized capital gains and losses (the increase or decrease in share price) and any dividend distributions. It is calculated by taking the change in the stock’s price, reinvesting all dividends, dividing by the initial price, and expressing the result as a percentage.

 
     
  Annual Return +/- Category/ Industry  
 

Time Periods: Last five calendar years.

Morningstar compares a stock or fund’s total return with that of the average of other stocks or funds in its peer group. A positive difference indicates the stock or fund outperformed its average peer by the indicated percentage, whereas a negative difference indicates the stock or fund underperformed its average peer by the indicated percentage.

 
     
  Annual Return % Rank Cat / Industry  
 

Time Periods: Last five calendar years.

This figure represents the percentile rank the stock’s/fund’s return would have in its industry/category during the designated time frame. Returns are ranked from highest to lowest, with the best return having a 1% ranking and the worst a 100% ranking. These relative figures are a good way to locate stocks that out- or underperformed their peers during a certain time period.

 
     
  Average Daily Volume (stocks only)  
  This shows a stock’s average daily trading volume. Note that when comparing the current day’s trading volume to this average, the average reflects a full day of trading whereas the intraday figure will reflect only trading for the part of the day that has passed.  
     
  Average Market Capitalization (mil$)  
  The average market capitalization of a fund’s equity portfolio measures the size of the companies in which it invests. (Market capitalization is calculated by multiplying the number of a company’s shares outstanding by its price per share.) Morningstar calculates this figure by taking the geometric mean of the market capitalizations of the stocks a fund owns.  
     
  Average Star Rating of Funds Owning (stocks only)  
  The average star rating of funds owning a stock is the average Morningstar star rating of the mutual funds that have reported owning shares of the company. It is calculated using each fund’s star rating and is weighted according to the amount of the stock it owns. A fund’s weighting is equal to the dollar value the fund has invested in the stock divided by the total dollar value that all funds have invested in the stock. The average fund rating for a stock is calculated by summing, across all funds that hold it, each fund’s star rating multiplied by its weighting.  
     
  (Cash – Long-Term Debt)/Market Cap (%) (stocks only)  
  (Cash – long-term debt)/market cap is normally used as an extreme value measure to determine whether there is enough cash to retire all of the company’s long-term debt. The number is expressed as a percentage so that one can see how much extra cash is left, or how much of a shortfall there is. Note that most companies have more long-term debt than cash, so this number will normally be negative. Companies for which this number is the least negative—or ideally positive—may be interesting value plays.  
     
  Consider Buying Price (S)  
  Consider Buying is the price below which we think investors should consider purchasing a stock, and is equivalent to the price at which it would earn a 5-star rating. Be sure to take your individual circumstances-including diversification, risk tolerance, and tax considerations-into account before making a final purchase decision.  
     
  Consider Selling Price (S)  
  Consider Selling is the price above which we think investors should consider selling a stock, and is equivalent to the price at which it would earn a 1-star rating. Again, be sure to take your individual circumstances into account before making a final decision to sell a stock.  
     
  Cost Per Share ($)  
  Cost per share is the average amount you paid per share for this security. It is calculated by dividing the total cost of your investment (total purchases) by the number of shares held. For transaction portfolios, sales are subtracted and the cost per share is calculated using the balance of your remaining total costs and remaining number of shares held. Multiple purchases and share splits are accounted for, and commissions are added to costs. Because reinvested dividends are not "money out of your pocket", they are not added to the total cost, but rather as part of your return. This means that as you reinvest your dividends, you'll have more shares vs. your cost, and your cost per share will decline.

Note: Cost per share displayed in Portfolio Manager is not the cost basis. The cost per share is simply to track the total amount of money you invested in your positions, and your average investment per share. Gain/Loss View in Portfolio Manager displays these costs and returns.

 
     
  Credit Quality  
  For individual bond holdings, credit quality is the rating a bond carries by one of the rating agencies. This data point is provided by the user.

For mutual funds (and other managed-investment products), average credit quality gives a snapshot of the portfolio’s overall credit quality. It is an average of each bond’s credit rating, adjusted for its relative weighting in the portfolio. U.S. government bonds carry the highest credit rating, while bonds issued by speculative or bankrupt companies usually carry the lowest credit ratings. Anything at or below BB is considered a high-yield, or "junk", bond. For the purposes of Morningstar's calculations, U.S. government securities are considered AAA bonds, nonrated municipal bonds generally are classified as BBB, and other nonrated bonds generally are considered B.

 
     
  Current Market Value ($)  
  Market value is the current value of a given holding, in dollars. It is calculated by multiplying the price per share by the total number of shares.  
     
  Current Price ($)  
  This is the most recently reported market price for a stock or mutual fund. Stock quotes are delayed 20 minutes. For mutual funds, current price is the NAV (net asset value) of the fund as of market close on the previous trading day.  
     
  Daily Volume (stocks only)  
  This data point a stock’s intraday trading volume in millions of shares.  
     
  Date of Most Recent Portfolio (funds only)  
  The date of the most recent portfolio refers to the date of the last portfolio Morningstar has received for the fund. Although Morningstar tries to ensure that the portfolio is timely, we do not always receive current portfolio information from fund companies. Older portfolios should not necessarily be disregarded; although they may not represent data from current holdings of the fund, they often still provide a good picture of the overall nature of the fund’s management style.  
     
  Day Change ($)  
  This is the Price Change ($) multiplied by the number of shares.  
     
  Dividend Growth Past 5 Years (%) (stocks only)  
  Five-year dividend growth measures the annualized growth of a company’s dividends over the indicated time period. Note that the calculation uses dividends paid out during the most recent trailing 12 months as compared with those paid out during the trailing 12 months six years ago. Increasing dividends are usually a signal that management has confidence in the company’s continued earnings power. Dividend growth—especially growth that has been steady from year to year—is a good sign for those investing for income.  
     
  Dividend Yield (%)—Trailing 12 Months  
  Dividend yield is calculated by dividing total dividends by the current price and multiplying by 100. Note that the total dividends used in the calculation are for the 12 months ending as of the last month-end.  
     
  Duration  
  Dividend Yield / Bond Coupon (%) - Trailing 12 Months  
     
  Earnings per Share $ (stocks only)  
 

Time Periods: Trailing 12 Months, Fiscal Year 1

Earnings per share is calculated by dividing net income by an average of the total shares outstanding for the year. This figure is a useful snapshot of how much a company earned in a given year, but it should always be looked at in the context of EPS figures for previous years. Note that per-share numbers are more useful than raw net income for cases where a company has issued a lot of new shares.

 
     
  Earnings per Share Growth (%)  
 

Time Periods: 1 Year, 3 Year

Earnings per share growth represents the compounded or annualized growth rate in a company’s earnings per share. The one-year growth rate is calculated from the end of the second fiscal year (FY2) through the most recently completed fiscal year (FY1); the three-year growth rate is calculated from the end of the fourth fiscal year (FY4) through the most recently completed fiscal year (FY1). Note that because it’s expressed on a per-share basis, growth in earnings per share takes into account dilution from new share issuances.

 
     
  Economic Moat (stocks only)  
 

The idea of an economic moat refers to how likely a company is to keep competitors at bay for an extended period of time. One of the keys to finding superior long-term investments is buying companies that will be able to stay one step ahead of their competitors. The economic moat rating is meant to capture this characteristic—think of it as the strength and sustainability of a firm’s competitive advantage.

One of the first factors we consider when determining the size of a firm’s economic moat is the company’s historical financial performance. Companies that have generated returns on capital higher than their cost of capital for many years running usually have a moat, especially if their returns on capital have been rising or are fairly stable.

Of course, the past is often not a predictor of the future, so we look carefully at the source of a company’s excess economic profits before assigning a moat rating. For example, a competitive advantage created by a hot new technology usually isn’t very sustainable, because it won’t be too long until someone invents a better widget.

Here are some of the attributes that can give companies economic moats:

• Huge Market Share: When a firm enjoys economies of scale in areas such as manufacturing, sales, and marketing, it can be pretty tough for a competitor to catch up.

• Low-Cost Producer: The ability to produce products or services at a lower cost than competitors is an especially potent advantage in commodity industries.

• Patents, Copyrights, or Governmental Approvals and Licenses: Some companies generate enormous profits when the government artificially protects their products or markets.

• Unique Corporate Culture: Although you should be careful about placing too much emphasis on this attribute, since it’s such a “soft” method of determining competitive advantage, there’s no question corporate culture can make a difference.

•High Customer-Switching Costs: If a firm can make it tough for its customers to use a competitor, it’s usually easy to keep ratcheting prices up just a bit year after year—which can lead to big profits.

• The Network Effect: This is a relatively rare, but potentially quite potent, source of competitive advantage, and often applies to the first mover in an emerging technology. Since a network’s value increases as more people use it, the company that creates the network can create a massive economic moat.

 
     
  Effective Maturity (B)  
 

Average effective maturity is a weighted average of all the effective maturities of the bonds in a portfolio. Effective maturity takes into consideration mortgage prepayments, puts, calls, adjustable coupons, and other features of individual bonds and is thus a more accurate measure of interest-rate sensitivity than nominal maturity. Longer-maturity funds are generally considered more interest-rate sensitive than their shorter counterparts.

 
     
  EPS from Continuing Ops (stocks only)  
 

Time Periods: Trailing 12 Months, Fiscal Year 1

Earnings per share from continuing operations is a company’s earnings per share from the day-to-day operations of its business. It does not include earnings from discontinued operations, extraordinary items, or accounting changes. EPS from continuing operations tends to be much more consistent and representative of a company’s true performance than final EPS, which is subject to manipulation by accounting rules.

 
     
  Equity per Share Growth (%)  
 

Time Periods: 1 Year, 3 Year

Equity per share growth is the compounded or annualized growth rate per share in a company’s shareholders’ equity, or book value. Equity is a company’s total assets minus its total liabilities—in other words, what’s left over for shareholders. Equity growth per share shows how quickly shareholders’ stake in the company is growing. Thus, growth in equity per share is one of the key variables in determining if a company is increasing shareholder wealth over time. Note, too, that because it’s expressed on a per-share basis, equity growth per share takes into account dilution from new-share issuances.

 
     
  Equity Style Box  
 

The Morningstar style box is a nine-square grid that provides a graphical representation of the “investment style” of stocks and mutual funds. For stocks and stock funds, it classifies securities according to market capitalization (the vertical axis) and growth and value factors (the horizontal axis).

By providing an easy-to-understand visual representation of stock and fund characteristics, the Morningstar style box allows for informed comparisons and portfolio construction based on actual holdings, as opposed to assumptions based on a fund’s name or how it is marketed. The style box also forms the basis for Morningstar’s style-based fund categories and market indexes.

How It Works:

The vertical axis of the style box defines three size categories, or capitalization bands—small, mid-size, and large. The horizontal axis defines three style categories. Two of these categories, “value” and “growth,” are common to both stocks and funds. However, for stocks, the central column of the style box represents the core style (those stocks for which neither value nor growth characteristics dominate); for funds, it represents the blend style (a mixture of growth and value stocks or mostly core stocks).

In general, a growth-oriented fund will hold the stocks of companies the portfolio manager believes will increase earnings faster than the rest of the market. A value-oriented fund contains mostly stocks the manager thinks are currently undervalued in price and will eventually see their worth recognized by the market. A blend fund might be a mix of growth stocks and value stocks, or it may contain stocks that exhibit both characteristics.

Style box assignments begin at the individual stock level. Morningstar determines the investment style of each individual stock in its database. The style attributes of individual stocks are then used to determine the style classification of stock mutual funds.

 
     
  Expense Ratio (funds only)  
  The annual expense ratio, taken from the fund’s annual report, expresses the percentage of assets deducted in the last fiscal year for fund expenses. This figure includes 12b-1 fees, management fees, administrative fees, operating costs, and all other asset-based costs incurred by the fund. Portfolio transaction fees, or brokerage costs, as well as initial or deferred sales charges are not included in the expense ratio. The expense ratio, which is deducted from the fund’s average net assets, is accrued on a daily basis. If the fund’s assets are small, its expense ratio can be quite high because the fund must meet its expenses from a restricted asset base. Conversely, as the net assets of the fund grow, the expense percentage should ideally diminish as expenses are spread across the wider base. Funds may opt to waive all or a portion of the expenses that make up their overall expense ratio.  
     
  Financial Health Grade (stocks only)  
  To get a high financial health grade, a company should have low financial leverage (assets/equity), high cash-flow coverage (total cash flow/long-term debt), and a large cash position (cash/assets). Also, companies with improving financial health are rewarded, while those with deteriorating health are penalized.  
     
  Fiscal Year End (stocks only)  
  This is the end date of a company’s accounting year. Annual reports and annual financials are prepared and published based on this date. A company’s fiscal year doesn’t usually correspond to the calendar year.  
     
  Fixed-Income Style Box (funds only)  
  Domestic and international fixed-income funds focus on the two pillars of fixed-income performance: interest-rate sensitivity and credit quality. Morningstar splits fixed-income funds into three groups of interest-rate sensitivity (high, medium, and low) and three credit-quality groups (high, medium, and low). These groupings graphically display a portfolio’s average effective duration and credit quality. As with equity funds, nine possible combinations exist, ranging from short maturity/high quality for the safest funds to long maturity/low quality for the riskiest.  
     
  Free Cash Flow/Market Cap (%) (stocks only)  
  Free cash flow/market cap is a measure of stock valuation. In contrast to many valuation measures, a lower free cash flow/market cap means the company is more richly valued by the market. One major advantage of this measure is that free cash flow is a better measure of a company¡¯s earning power than actual earnings, as it more accurately takes into account things like investments in plants and equipment that are necessary for the ongoing business.  
     
  Fund Family Score (funds only)  
 

Morningstar’s Fund Family Score was designed to give investors a measure of how well a firm has done as a whole in each of four possible asset classes.

We aggregate the star ratings earned by each of the family’s funds within the domestic stock, foreign stock, municipal bond, and taxable bond asset classes. The score is an asset-weighted average of a firm’s star ratings within those four classes. We use each fund’s asset level from three years ago in order to reflect investors’ actual recent experience at the firm.

The score is intended to be a check on the quality of a firm’s management in each asset class. A score of 2 or lower indicates that a firm has performed poorly in that asset class. This may signal the firm has structural problems such as weak research or high costs. Thus, a low fund family score indicates you should be wary of a fund even if the fund itself has a high rating.

The score is not intended to serve as a ranking among fund families. The law of averages dictates that a firm with a lot of funds in an asset class is more likely to have a fund family score near the average (3). Conversely, a smaller firm is more likely to have a score near the low or high end because only a few funds are being measured. If you want to compare fund family scores, be sure to do it using firms that offer a similar number of funds.

 
     
  Fund Manager Tenure (funds only)  
  Fund manager tenure reflects the number of years that the current manager has been at the helm of the fund. For funds with more than one manager, the average tenure is shown. If the fund company designates the manager as “management team” and does not disclose the names of the managers to Morningstar, manager tenure appears as a dash for the fund.  
     
  Fund Size (Total Assets in $MM) (funds only)  
  The net asset figures are based on month-end net assets of all share classes of the mutual fund, recorded in millions of dollars. Net-asset figures are useful in gauging a fund’s size, agility, and popularity. They help determine whether a small company fund, for example, can remain in its investment-objective category if its asset base reaches an ungainly size. Benefits: This information can be useful in gauging a fund’s mass and agility. Origin: Morningstar lists the month-end assets, as they have been reported by the fund. Example: It is important to keep in mind that the size of the fund as measured by net assets has little or no correlation to the size of the companies in which the fund invests. For example, a fund has over $2 billion in net assets, with an average market cap of $863 million. In other words, this is a very large fund that invests primarily in equity securities of small companies with market capitalizations less than $1 billion.  
     
  G - L
     
  Gain / Loss Since Purchase ($)  
  This represents the amount, in dollars, that you have gained or lost since purchasing a security. This number is calculated by subtracting the cost per share from the market value. Note that commissions are added to costs and thus reduce gains and increase losses.  
     
  Gain / Loss Since Purchase (%)  
  This represents the amount, expressed as a percentage, that you have gained or lost since purchasing this security. Please note that this figure, unlike most return figures shown on Morningstar.com, is not annualized. (If a holding is worth 21% more now than when you bought it two years ago, the gain will display as 21%, whereas elsewhere it would display as an annualized return of 10%.) This number is calculated by subtracting the cost of the security from the market value, dividing the result by the cost, and multiplying by 100.  
     
  Growth Grade (stocks only)  
  The growth grade shows how a company’s growth compares with that of other stocks in its sector. It measures not only how fast a company’s sales are growing, but how consistent that growth has been and whether it is speeding up or slowing down. The growth grade encapsulates the most important information about a company’s growth into a single rating, allowing easy comparison between companies.  
     
  Holding Transaction History  
  Click the image to view past transaction involving this holding, or to edit the holding's transactions.  
     
  Holding Type  
  Currently we track stocks, open-end mutual funds, closed-end mutual funds, ETFs, and cash.  
     
  Hurdle Rate (S)  
  The hurdle rate is a quantitative measure of a company's risk--the riskier the stock, the higher its hurdle rate will be. The hurdle rate is the average annual return we need to get from a stock to justify the risk of holding it. We calculate the 5-year risk-adjusted return for any stock by subtracting the hurdle rate from the 5-year expected return.

This hurdle rate has two components: cost of equity and margin of safety. Note that the hurdle rate, for us, is always greater than cost of equity alone because it adds in a margin of safety. We're more demanding than the market about the price we'll pay for a stock.
 
     
  Industry and Industry Group (stocks only)  
  This field indicates your stock holding’s primary area of business. Morningstar’s industry classifications are more specific than our sector divisions.  
     
  Initial Purchase Date  
  This is the date of the earliest purchase of a holding.  
     
  Last Stock Split (stocks only)  
  The last stock split is the last date on which the stock reported a split. A stock split increases the number of a company’s shares outstanding. Although they have no effect on shareholders’ percentage ownership of the company, some investors consider stock splits to be a bullish sign.  
     
  M - R
     
  Maturity Date (B)  
  This is the date on which a bond will mature. It is only applicable to individual bond holdings as bond funds do not mature.  
     
  Mean EPS Estimate for Next Year (stocks only)  
  Mean EPS estimate for next year is the EPS that analysts, on average, expect the company to generate during the fiscal year following this one. By looking at analysts’ consensus estimate of a company’s earnings for the next fiscal year, and comparing it with earnings forecasts for the current fiscal year, you can see how much near-term growth analysts are expecting.  
     
  Mean EPS Estimate for This Year (stocks only)  
  Mean EPS estimate for this year is the EPS that analysts, on average, expect the company to generate during the current fiscal year. By comparing this figure with the company’s EPS from the previous fiscal year, you can see how much analysts expect the company to grow its earnings this year.  
     
  Morningstar Business Risk (stocks only)  
 

To generate Morningstar Business Risk, our analysts score companies on several risk factors:

• How cyclical is the company’s industry?

• How wide is the company’s economic moat?

• How strong is the company’s balance sheet?

• How does the company’s free cash flow compare with its sales?

• How sustainable is the company’s operating cash flow?

• How big is the company?

• Is there a nonfinancial issue that could materially affect the company’s fortunes?

The scores are summed to produce a composite score, which is translated into the ratings below average, average, above average, or speculative.

 
     
  Morningstar Fair Value (stocks only)  
  Fair value is the Morningstar analyst’s estimate of what a stock is worth. Our fair value estimate should be used in conjunction with our economic moat rating and our business risk rating. In order to determine fair values for stocks, Morningstar analysts project five years’ worth of a company’s revenue growth, profitability, and asset efficiency. The analysts then enter these projections into a discounted cash-flow (DCF) model, which calculates a fair value based on the resulting cash flows.  
     
  Morningstar Rating for Funds  
  Morningstar rates mutual funds from 1 to 5 stars based on how well they’ve performed (after adjusting for risk and accounting for sales charges) in comparison to similar funds. Within each Morningstar category, the top 10% of funds receive 5 stars and the bottom 10% receive 1 star. Funds are rated for up to three time periods—three, five, and 10 years, and these ratings are combined to produce an overall rating. Funds with less than three years of history are not rated. Ratings are objective, based entirely on a mathematical evaluation of past performance. They’re a useful tool for identifying funds worthy of further research, but they shouldn’t be considered buy or sell signals.  
     
  Morningstar Rating for Stocks  
 

The stock star rating is calculated by comparing a stock’s current market price with Morningstar’s assessment of the stock’s fair value. A stock’s risk and economic moat are also considered. Thus, a stock with a lower risk score and a wider economic moat is likely to receive a higher star rating than a stock with a higher risk score and a smaller economic moat, given an equal discount (or premium) to fair value. Star ratings for stocks range from 1 (lowest) to 5 (highest).

Morningstar rates only stocks that our analysts have under full coverage. Ratings are updated using each day’s closing stock price and can therefore change daily. They can change because of a move in the stock’s price or a change in the analyst’s estimate of the stock’s fair value, risk rating, or economic moat rating—or any combination thereof. If the price of a stock our analysts cover falls significantly below $5, we generally will not rate the stock, because the low price will make the star rating too volatile to be meaningful.

Under Review
We may place a stock’s rating temporarily “under review” if a company releases significant news after the market’s close, and we need time to review our estimate of fair value. You can expect stocks that are “under review” to have a new Analyst Report and fair value estimate within a few days.

Pending
When we publish a new analysis during the trading day, the star rating and market price will display “pending” until after that day’s market close. We do this to obtain a stable reference price on which to base the star rating, which means waiting for a closing price to become available.

 
     
  Morningstar Return (funds only)  
  Morningstar return is an assessment of the fund's excess return over a risk-free rate (the return of the 90-day Treasury bill) in comparison to similar funds, with an emphasis on downward variation. Therefore, if two funds have precisely the same return, the one with greater variations in its return is given the larger risk score. In each Morningstar Category, the top 10% of funds earn a High Morningstar Return, the next 22.5% Above Average, the middle 35% Average, the next 22.5% Below Average, and the bottom 10% Low. Morningstar Return is measured for up to three time periods (three-, five-, and 10-years). These separate measures are then weighted and averaged to produce an overall measure for the fund. Funds with less than three years of performance history are not rated.  
     
  Morningstar Risk (funds only)  
  This data point presents the past downside risk a fund has exhibited relative to other offerings in its category, as evidenced by its monthly returns. In each Morningstar category, the 10% of funds with the lowest measured risk are described as low risk, the next 22.5% as below average, the middle 35% as average, the next 22.5% as above average, and the top 10% as high. Morningstar Risk is measured for up to three time periods (three, five, and 10 years). These separate measures are then weighted and averaged to produce an overall measure for the fund. Funds with less than three years of performance history are not rated.  
     
  Morningstar Stewardship Grade  
 

Morningstar Stewardship Grade for Stocks

Morningstar stock analysts assign a Stewardship Grade to each of the companies in Morningstar's coverage universe. We evaluate the demonstrated commitment to shareholders of each company's board and management team. Our assessment is divided into three general areas:

Transparency. Morningstar analysts evaluate a company's accounting practices and financial disclosure, aiming to identify firms that provide investors with insufficient or potentially misleading information. Analysts review whether a company has instituted major changes in accounting procedures, overused "one-time" charges, or applied aggressive accounting methods, among other practices.

Shareholder Friendliness. This category assesses the power of shareholders relative to management, evaluates the firm's share-class structure and assignment of CEO and board chair roles, and notes the existence of any takeover defenses or related-party transactions.

Incentives, Ownership, and Overall Stewardship. This area focuses on whether management's incentives are aligned with shareholders' interests. Morningstar analysts penalize those firms that change management goals midstream, issue too many options, overcompensate executives, or have low levels of equity ownership.

Morningstar stock analysts base the Stewardship Grades on public filings, previous management actions, conversations with company officials, and their own expertise.

We assign the grades on an absolute scale--not on a curve or on an industry-peer basis. Therefore, if a company engages in practices that the Morningstar analysts think do not reflect good stewardship of investors' capital, it will receive a poor grade regardless of how other firms may have scored.

Our Stewardship Grades can be interpreted as follows:

• A means "Excellent"
• B means "Good"
• C means "Fair"
• D means "Poor"
• F means "Very Poor"

For a small number of companies we cover, sufficient data to assign a complete grade was unavailable. These firms will receive a designation of "NA," indicating that the rating is not applicable.

Morningstar Stewardship Grade for Funds

Morningstar's Stewardship Grade for funds goes beyond the usual analysis of strategy, risk, and return. The Stewardship Grade allows investors and advisors to assess funds based on factors that we believe influence the following:

• The manner in which funds are run;
• The degree to which the management company's and fund board's interests are aligned with fund shareholders;
• The degree to which shareholders can expect their interests to be protected from potentially conflicting interests of the management company.

We assign each fund a letter grade from A (best) to F (worst). Funds are graded on an absolute basis. There is no "curve." Morningstar analysts' evaluation of five factors determine the grade for each fund:

• Regulatory Issues
• Board Quality
• Manager Incentives
• Fees
• Corporate Culture.

Morningstar's Stewardship Grade for funds is entirely different from the Morningstar Rating for funds, commonly known as the star rating. There is no relationship between the two.

 
     
  My Notes on Holding  
  Click the image to view and edit your notes about each holding.  
     
  Name  
  This is the name of the security.  
     
  Net Income Growth (%)  
 

Time Periods: 1 Year, 3 Year

Net income growth represents the annualized growth rate in a company’s net income. The one-year growth rate is calculated from the second fiscal year (FY2) to the most recently completed fiscal year (FY1); the three-year growth rate is calculated from the fourth fiscal year (FY4) to the most recently completed fiscal year (FY1). Net income growth shows how rapidly a company has been able to boost its “bottom line.” Growth investors might look for companies with net income growth of, say, 20% or more. If net income growth shows NMF, it means the company lost money in one of the years used in the growth-rate calculation, rendering any growth rate calculated meaningless. (NMF stands for no meaningful figure.)

 
     
  Net Margin (%) — Trailing 12 Months  
  Net margin is a measure of profitability. It is equal to annual net income over the trailing 12 months divided by revenues during the same time period. The resulting figure is then multiplied by 100 to put it in percentage form. This figure gives a more accurate picture of a company’s recent performance than the most-recent annual net margin figure, which may be more than a year old.  
     
  News Link  
  The news icon links to stories from Morningstar, Dow Jones, and Reuters, and press releases from BusinessWire and PR Newswire about holdings in your portfolio. Investors should use some caution in reading press releases, as they may not be written by objective sources.  
     
  Number of Estimates for Next Year’s EPS Estimate (stocks only)  
  Number of estimates for next year’s EPS estimate is the number of analysts polled to determine the mean EPS for next year. By looking at this figure, you can see how much attention the company gets from the analyst community. Typically estimates generated by larger numbers of analysts tend to be more stable than those generated by just a handful of analysts.  
     
  Number of Estimates for This Year’s EPS Est (stocks only)  
  Number of estimates for this year’s EPS estimate is the number of analysts polled to determine the mean EPS estimate for this year. By looking at this figure, you can see how much attention the company gets from the analyst community. Typically estimates generated by larger numbers of analysts tend to be more stable than those generated by just a handful of analysts.  
     
  Number of Funds Owning (stocks only)  
  Number of funds owning is the number of mutual funds that own shares in the company.  
     
  Payout Ratio (%) — Trailing 12 Months (stocks only)  
  Payout ratio is calculated by dividing dividends declared for the past 12 months by net income for the same period of time.  
     
  PEG Payback Years (stocks only)  
  PEG payback years is the number of years it would take for a company’s cumulative earnings (beginning at a base level of $1) to equal the stock’s current P/E ratio, assuming that the company continues to increase its annual earnings at five-year estimated EPS growth rate that analysts project. A PEG payback period of six years, for example, means that it would take six years for an investor to recoup the price paid now for $1 of corporate earnings (the P/E ratio). Equivalently, the PEG payback period is the number of years it would take for the cumulative earnings of a company to equal the current price of the stock. In other words, the PEG payback period is the amount of time it would take for the company to “earn” its stock price. The higher PEG payback, the longer the company will take to earn the equivalent of its stock price. A high PEG payback may indicate a stock will fail to generate sufficient earnings to support its current valuation.  
     
  PEG Ratio (stocks only)  
  The PEG ratio is a stock’s forward P/E divided by the company’s five-year projected EPS growth. The forward price/earnings ratio used in the numerator of this ratio is calculated by taking the current share price and dividing by the mean EPS estimate for the current fiscal year. The denominator is the average estimate of long-term EPS growth, derived from polled analysts.  
     
  Percent Owned by Mutual Funds (stocks only)  
  Percent owned by mutual funds is the percentage of a company’s common shares that are owned by mutual funds. It is derived by dividing the aggregate number of company shares owned by mutual funds by the total shares outstanding (and multiplying by 100 to convert the result to percentage form). A high percent fund ownership figure can be an indicator that a stock is popular among mutual fund managers. Conversely, a low percent fund ownership figure can indicate that the stock has been overlooked or is unpopular among fund managers.  
     
  Portfolio Weight (%)  
  This is the percentage of assets the holding occupies in the portfolio.  
     
  Potential Capital Gains Exposure (funds only)  
  Potential capital gains exposure is the percent of a fund’s total assets that represent unrealized capital gains. This is the percentage of the fund’s assets that would be subject to taxation if the fund were liquidated. Where a negative number appears, the fund has reported losses on its books. This information (realized and unrealized appreciation) is taken from the fund’s annual report. Although funds rarely liquidate their entire portfolio, a fund with a higher potential capital gains exposure may be more likely to realize large capital gains as a result of a manager change or strategy shift. A high capital gains exposure often accompanies a low turnover strategy, wherein a fund holds stocks over the long term, allowing profits to accumulate.  
     
  Previous Close ($)  
  Previous close is the official price of the stock or fund at the market close on the previous trading day.  
     
  Price/Book  
 

Time Periods: Current, 5-Year Average

Price/book (P/B) is a stock’s most recent price divided by its most recent book value per share. By comparing the current price/book ratio with its five-year average P/B ratio, you can quickly see if the company is currently valued higher or lower than it has been historically.

 
     
  Price/Cash Flow  
 

Time Periods: Current, 3-Year Average

Price/cash flow is a stock’s most recent price divided by its cash-flow per share during the most recent fiscal year. For international stocks, price/cash flow can be a more meaningful figure than price/earnings. Because earnings are calculated in a variety of ways worldwide, price/cash flow minimizes accounting differences and provides a more consistent standard of valuation.

 
     
  Price/Earnings - Trailing (stocks only)  
 

Time Periods: Current, 5-Year Average

Current P/E is a stock’s current price divided by the company’s trailing 12-month earnings per share. By looking at the five-year average P/E alongside the current P/E, you can quickly tell whether a company is currently valued above or below its average P/E.

 
     
  Price/Earnings - Forward  
 

Stocks:
A stock’s price/earnings is its current market price divided by consensus expectations for EPS from continuing operations for next year. Elsewhere, it is sometimes referred to as price/forward earnings. In any case, P/E is the multiple of earnings a buyer pays for a stock. Lower P/Es are generally desirable but must be weighed against the quality of the earnings and a company’s future prospects.

Funds:
A fund’s price/earnings is the inverse of the earnings yield figure calculated and used in determining equity style-box placement. It is very similar to an average of the price/earnings of the stocks a mutual fund holds, except that instead of aggregating P/Es, the numbers are inverted to E/Ps prior to aggregation. Also, when analyst expectations are lacking for next year’s EPS from continuing operations for individual stocks, these are projected using historic growth rates. Lower P/Es are generally desirable but must be weighed against the quality of the earnings and a company’s future prospects.

 
     
  Price/Sales  
 

Time Periods: Current, 5-Year Average

Price/sales is a stock’s current price divided by its sales per share over the trailing 12 months. By comparing the current price/sales with its 5-Yr Average P/S, you can quickly tell whether a company is currently valued above or below its historical average P/S ratio. Because the denominator of P/S, sales, tends to be fairly steady, P/S is usually a less volatile price multiple than either P/E or P/B. Thus it can be an especially useful valuation measure for cyclicals or other companies with volatile earnings.

 
     
  Price Change ($)  
  This is the difference, in dollars, between a stock’s current price and its price as of market close on the prior trading day. For mutual funds, it represents the difference between the NAV of the fund as of the market close on the prior trading day and its NAV as of the market close two trading days ago.  
     
  Price Change (%)  
  This is the change, as a percentage, between a stock’s current price and its price as of the market close on the prior trading day. For mutual funds, it represents the difference between the NAV of the fund as of the market close on the prior trading day and its NAV as of the market close two trading days ago. The formula used to calculate the percent change is: 100* [(current price - previous price)/previous price].  
     
  Profitability Grade (stocks only)  
  The profitability grade shows how well a company’s profitability, as measured by its return on assets, compares with its sector. It measures not only raw profitability, but also whether a company’s ROA is consistent and improving. The profitability grade encapsulates the most important information about profitability into a single rating, which allows easy comparisons between companies.  
     
  Projected EPS Growth - 5 Year  
  For a stock, projected five-year EPS growth is the mean estimate of long-term EPS growth, derived from estimates by analysts who cover the stock. The five-year earnings growth forecast shows what the consensus is among analysts concerning the company's long-term growth rate.

For a mutual fund (and other managed products), projected five-year earnings growth is one of the 10 factors that determine which section of the equity style box a fund falls into. It is essentially a weighted average of the five-year EPS growth estimates of each fund's stock holdings, though there are some refinements made in aggregating the underlying numbers.

 
     
  Projected EPS Growth (This Year Est / Last Year) (stocks only)  
  Projected EPS growth is the mean estimate for this year’s EPS divided by the actually EPS generated during the last fiscal year. The number is presented as a percentage and reflects anticipated growth or decline in EPS. If the quotient for a company is 10%, for example, then analysts expect to see a 10% growth in EPS this year.  
     
  Projected EPS Growth Next Year (stocks only)  
  Projected EPS growth for next year is the mean estimate for next year’s EPS divided by the mean estimate for this year’s EPS. The number is presented as a percentage and reflects anticipated growth or decline in EPS. If the quotient for a company is 10%, for example, then analysts expect to see a 10% growth in EPS next year.  
     
  Relative Strength vs. S&P 500 (stocks only)  
 

Time Periods: 1 Month, 3 Month, 1 Year, 3 Year

The relative-strength statistic measures the price return of a stock versus the price return of the S&P 500 index for the designated time period. The higher the relative-strength figure, the better the stock has performed versus the index. A negative number indicates that the stock has underperformed the index. The actual number is calculated based on comparing how an investor would have done if he or she had invested $1,000 in the stock and $1,000 in the index. If an investor buys $1,000 worth of the stock and the index at the beginning of the period, and the stock returns 20% and the index returns 10%, the ending values are $1,200 for the stock and $1,100 for the index. We then divide the ending value of the stock investment by the ending value of the index investment. In this case: $1,200 divided by $1,100 or 1.09. We then subtract 1 and multiply by 100. In our example the relative strength would be 9.

 
     
  Return % Rank Category / Industry  
 

Time Periods: YTD, 4 Week, 3 Month, 12 Month, 3 Year, 5 Year, 10 Year, 15 Year

Stocks:
Morningstar compares a stock’s total return with that of other stocks in the same industry. A percentile rank of 1 means the stock lands in the top percentile in terms of total return for that time period (i.e., it has performed better than 99% of the stocks with which it is compared).

Funds:
This is the fund’s total-return percentile rank relative to all funds that fall into the same Morningstar Category during the time period measured. The highest (or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100. The top-performing fund in a category will always receive a rank of 1. Data for 10 Year and 15 Year are as of the latest month-end.

 
     
  Return +/- Category/Industry  
 

Time Periods: YTD, 4 Week, 3 Month, 12 Month, 3 Year, 5 Year, 10 Year, 15 Year

Stocks:
Morningstar compares a stock’s total return with that of the average of other stocks in the same industry. A positive difference indicates the stock outperformed its average peer by the indicated percentage, whereas a negative difference indicates the stock underperformed its average peer by the indicated percentage.

Funds:
Morningstar compares a fund’s total return with that of the average of other funds in the same category. A positive difference indicates the fund outperformed its average peer by the indicated percentage whereas a negative difference indicates the fund underperformed its average peer by the indicated percentage. Data for 10 Year and 15 Year are as of the latest month-end.

 
     
  Return on Assets (%) - Trailing 12 Months  
  Return on assets is the percentage a company earns on its assets. The calculation is net income divided by beginning-of-period total assets. The resulting figure is then multiplied by 100 to put it in percentage form. ROA shows how much profit a company generates on its asset base. The better the company, the more profit it generates as a percentage of its assets.  
     
  Return on Equity (%) -- Trailing 12 Months  
  Return on equity is the percentage a company earns on its total equity. The calculation is net income divided by beginning-of-period total equity. The resulting figure is multiplied by 100 to put it in percentage form. Return on equity shows how much profit a company generates on the equity shareholders have in the company.  
     
  Revenue Growth (%)  
 

Time Periods: 1 Year, 3 Year

Revenue growth represents the percentage growth in a company’s revenue over the trailing time period. Growth rates over a period of more than one year are annualized.

 
     
  Role in Portfolio (funds only)  
  Funds are designated as core, supporting player, or specialty holdings. These roles indicate the purpose for which a fund is best suited within a portfolio. Core funds should be the bulk of an investor’s portfolio, while supporting players contribute to a portfolio but are secondary to the core. Specialty offerings tend to be speculative and should typically be only a small portion of investors’ portfolios.  
     
  S - Z
     
  SEC Yield (%) (funds only)  
  SEC yield is similar to standard dividend yield, except the SEC mandated methodology is designed to provide a more accurate yield figure that is more difficult for fund companies to manipulate. Unlike standard dividend yield, the SEC yield calculation is based on income generated during the 30-day period ending on the last day of the previous month. The resulting number is annualized so as to reflect the yield an investor would earn over an entire yield, were that monthly yield to persist throughout a 12-month period. SEC yield figures are collected by Morningstar and often lag by one month.  
     
  Shares Held  
  This is the number of shares you own of this security. You entered this number (or the transactions that resulted in this number). Note that Portfolio Manager automatically adjusts stock prices to reflect stock splits, but you must manually edit your portfolio to account for the new number of shares you own. You must also manually edit your portfolio to reflect reinvested dividends.  
     
  Stock Industry/Fund Category  
 

Stock industry indicates the primary market in which a company competes. Industries are more refined than stock sectors and are designed to describe more accurately exactly what a company’s business is. See stock sector for more information.

Fund category indicates the type of securities a fund holds or the segment of the market it focuses on. Morningstar fund categories are assigned based on the underlying securities in each portfolio. We place funds in a given category based on their portfolio statistics and compositions over the past three years. If the fund is new and has no portfolio history, we estimate where it will fall before giving it a more permanent category assignment. When necessary, we change category assignments based on recent changes to the portfolio.

Domestic-Stock Funds
Funds with at least 70% of assets in domestic stocks are categorized based on the style and size of the stocks they typically own. The style and size divisions reflect those used in the Morningstar investment style box: value, blend, or growth style, and small, medium, or large median market capitalization. See Equity Style Box for more details on style methodology.

Based on their investment style over the past three years, domestic-stock funds are placed in one of the nine categories: large growth, large blend, large value, mid-growth, mid-blend, mid-value, small growth, small blend, or small value. Domestic-equity funds that specialize in a particular sector of the market are placed in a specialty category: communications, financials, health care, natural resources, precious metals, real estate, technology, or utilities.

We also have domestic-stock categories covering:

Conservative Allocation
Conservative allocation funds invest in both stocks and bonds and maintain a relatively small position in stocks. These funds typically have 20% to 50% of assets in stocks and 50% to 80% of assets in bonds and cash.

Moderate Allocation
Moderate allocation funds invest in both stocks and bonds and maintain a relatively large position in stocks. These funds typically have 50% to 70% of assets in stocks and the remainder in bonds and cash.

Bear Market
Bear-market funds use short positions and/or derivatives in order to profit from stocks that drop in price. Because these funds have extensive holdings in shorts or puts, their returns generally move in the opposite direction of the benchmark index.

International-Stock Funds
Stock funds that have invested 40% or more of their equity holdings in foreign stocks (on average over the past three years) are placed in one of the following international-stock categories: Europe, Japan, Latin America, diversified Pacific/Asia, Pacific/Asia ex-Japan, or diversified emerging markets. There are also the following categories:

Foreign Large Value
These funds seek capital appreciation by investing in large international stocks that are value-oriented. Large-cap foreign stocks have market capitalizations greater than $5 billion. Value is defined based on low price-to-book and price-to-cash flow ratios, relative to the MSCI EAFE index. These funds typically will have less than 20% of assets invested in U.S. stocks.

Foreign Large Blend
These funds seek capital appreciation by investing in a variety of large international stocks. Large-cap foreign stocks have market capitalizations greater than $5 billion. The blend style is assigned to funds where neither growth nor value characteristics predominate. These funds typically will have less than 20% of assets invested in U.S. stocks.

Foreign Large Growth
These funds seek capital appreciation by investing in large international stocks that are growth-oriented. Large-cap foreign stocks have market capitalizations greater than 5 billion. Growth is defined based on high price-to-book and price-to-cash flow ratios, relative to the MSCI EAFE index. These funds typically will have less than 20% of assets invested in U.S. stocks.

Foreign Small/Mid Value
These funds seek capital appreciation by investing in small- and mid-sized international stocks that are value-oriented. Small-and mid-cap stocks have market capitalizations less than $5 billion. Value is defined based on low price-to-book and price-to-cash flow ratios, relative to the MSCI EAFE index. These funds typically will have less than 20% of assets invested in U.S. stocks.

Foreign Small/Mid Growth
These funds seek capital appreciation by investing in small- and mid-sized international stocks that are growth-oriented. Small-and mid-cap stocks have market capitalizations less than $5 billion. Growth is defined based on high price-to-book and price-to-cash flow ratios, relative to the MSCI EAFE index. These funds typically will have less than 20% of assets invested in U.S. stocks.

World
World-stock funds have 20% to 60% of stocks invested in the United States.

World Allocation
World-allocation funds have both foreign stocks and domestic (and often foreign) bonds.

Bond Funds
Bond funds are divided into two main groups: taxable bond and municipal bond.

Taxable-Bond Funds
Taxable-bond funds fall into the following primary categories:

Long-Term Government
Intermediate-Term Government
Short-Term Government
Long-Term Bond
Intermediate-Term Bond
Short-Term Bond

The following are additional, less-common types of taxable-bond funds:

Ultrashort Bond
Ultrashort bonds take on very little interest-rate risk. To qualify for inclusion in this category, a fund must have an average duration or an average effective maturity of less than one year.

Bank Loan
Bank-loan funds invest primarily in floating-rate bank loans instead of bonds. In exchange for the extra credit risk they carry, these investments offer high interest payments that typically float above a common short-term benchmark.

World Bond
World-bond funds invest at least 40% of assets in foreign-market bonds.

Emerging-Markets Bond
These funds invest at least 65% of assets in emerging-markets bonds.

High-Yield Bond
High-yield funds invest at least 65% of assets in bonds rated below BBB.

Multisector Bond
This category includes funds that diversify their assets among several fixed-income sectors, usually U.S. government obligations, foreign bonds, and high-yield domestic-debt securities.

Municipal-Bond Funds
Municipal-bond funds, broadly speaking, either focus on bonds from a single state, in which case their income is exempt from both state and federal taxes, or invest in whichever states offer the most attractive opportunities. The latter are considered Muni-National funds and are divided into the following categories:

Municipal National Long-Term
Municipal National Intermediate-Term
High-Yield Municipal
Municipal National Short

State-Specific Munis
Muni funds that focus on a single state are placed in one of the following categories:

Muni California Intermediate/Short
Muni California Long-Term
Muni Florida
Muni Massachusetts
Muni Minnesota
Muni New Jersey
Muni New York Intermediate/Short
Muni New York Long-Term
Muni Ohio Muni Pennsylvania

Muni funds that don’t focus on these states belong to either Muni Single State Int/Short or Muni Single State Long.

Municipal funds that invest predominantly in riskier high-yield debt are put into the High-Yield Muni category regardless of whether they are single state or national.

 
     
  Stock Sector (stocks only)  
 

Morningstar divides the stock market into three broad super sectors (see Stock Super Sector entry), each of which contains four specific industry sectors. Sectors are based on what companies actually do. That is, unlike some other sector classification systems, sectors aren't based on the expected behavior of the stocks of these companies. The sectors are as follows:

Software
Companies engaged in the design and marketing of computer operating systems and applications. Examples include Microsoft, Oracle, and Siebel Systems.

Hardware
Manufacturers of computer equipment, communication equipment, semiconductors, and components. Examples include IBM, Cisco Systems, and Intel.

Media
Companies that own and operate broadcast networks and those that create content or provide it to other media companies. Examples include AOL Time Warner, Walt Disney, and The Washington Post.

Telecommunication
Companies that provide communication services using fixed-line networks or those that provide wireless access and services. Examples include SBC Communications, AT&T, and Alltel.

Health Care Services
Includes biotechnology, pharmaceuticals, research services, HMOs, home health, hospitals, medical equipment and supplies, and assisted living companies. Examples include Abbott Laboratories, Merck, and Cardinal Health.

Consumer Services
Includes retail stores, personal services, homebuilders, home supply, travel and entertainment companies, and educational providers. Examples include Wal-Mart, Home Depot, and Expedia.

Business Services
Includes advertising, printing, publishing, business support, consultants, employment, engineering and construction, security services, waste management, distributors, and transportation companies. Examples include Manpower, R. H. Donnelley, and Southwest Airlines.

Financial Services
Includes banks, finance companies, money management firms, savings and loans, securities brokers, and insurance companies. Examples include Citigroup, Washington Mutual, and Fannie Mae.

Consumer Goods
Companies that manufacture or provide food, beverages, household and personal products, apparel, shoes, textiles, autos and auto parts, consumer electronics, luxury goods, packaging, and tobacco. Examples include PepsiCo, Ford Motor, and Kraft Foods.

Industrial Materials
Includes aerospace and defense firms, and companies that provide or manufacture chemicals, machinery, building materials, and commodities. Examples include Boeing, DuPont, and Alcoa.

Energy
Companies that produce or refine oil and gas, oil field service and equipment companies, and pipeline operators. Examples include ExxonMobil, Schlumberger, and BP Amoco.

Utilities
Electric, gas, and water utilities. Examples include Duke Energy, Exelon, and El Paso.

 
     
  Stock Super Sector (stocks only)  
  Morningstar divides stocks into three “super sectors”: information economy, service economy, and manufacturing economy. The information economy, which made up 21% of the U.S. market as of May 31, 2002, includes the telecommunications, software, hardware, and media sectors. The service economy, totaling 50% of the U.S. market, captures four sectors: health care, consumer services, business services, and financial services. The manufacturing economy, at 29% of the U.S. market, includes consumer goods, industrial materials, energy, and utilities. Since sectors can vary greatly in their characteristics, comparing a stock with its sector rather than the market as a whole is generally a better way of putting it in the proper context.  
     
 

Stock Type (stocks only)

 
 

Morningstar divides most stocks into eight type designations: distressed, hard asset, cyclical, speculative growth, aggressive growth, classic growth, slow growth, and high yield. Each designation defines a broad category of stocks by investment characteristics. Stocks are assigned to a type based on objective financial criteria according to a proprietary Morningstar algorithm, so stocks of the same type have similar economic fundamentals. Every stock has individual idiosyncrasies, but in general, when evaluating investments, many of the same concerns and evaluation methods will apply across the stocks in one type.

One benefit of stock types is that they help you quickly determine the diversification level of your portfolio. For instance, you might discover that most of your holdings are categorized as speculative growth. If you want to lessen the portfolio’s risk, you could invest in other types of stocks.

You may notice that some stocks in our database do not have stock types. This is because they do not meet the criteria needed to fit into any of the stock type categories.

Detailed descriptions of the different stock types follow:

Distressed
These companies are having serious operating problems. This could mean declining cash flow, negative earnings, high debt, or some combination of these. Such “turnaround” stocks tend to be highly risky but are sometimes intriguing investments.

Hard Asset
These companies’ main business revolves around the ownership or exploitation of hard assets such as real estate, metals, timber, etc. Such companies typically sport a low correlation with the overall stock market, and investors sometimes look to them as a hedge against inflation.

Cyclical
Cyclical companies’ core business can be expected to fluctuate in line with the overall economy. In a booming economy such companies will look excellent; in a recession, their growth often stalls and they might even lose money.

Speculative Growth
Don’t expect consistency from speculative-growth companies. Their profits are at best spotty. At worst they lose money. In fact, many companies never make it beyond speculative growth, going instead to bankruptcy court. That’s why they’re speculative. But current profitability isn’t what makes speculative-growth companies interesting—it’s their prospects for future profits. Hopefully, a speculative-growth company will eventually blossom into a world-class firm.

Aggressive Growth
Aggressive-growth companies show a bit more maturity than their speculative-growth counterparts: They post rapid growth in profits, not just in sales—a sign of more staying power. At this point, it’s time to make some money.

Classic Growth
These firms are in their prime and have little left to prove. The best classic growers have blossomed into money machines, churning out steady growth, high returns on capital, positive free cash flows, and rising dividends. The catch is, their growth is nowhere near that of the aggressive-growth group.

Slow Growth and High Yield
The growth of these companies is a fading memory. Having run out of attractive investment opportunities, most of them pay out the bulk of their earnings in dividends rather than plow the profits back into their businesses.

While there may be an aging process for companies, there’s not one for stocks. Investors such as Warren Buffet have focused on finding great stocks in and around the classic-growth category—companies such as Coca-Cola and American Express. Peter Lynch was more eclectic, investing in everything from speculative growth—Dunkin’ Donuts and Pep Boys—to slow growth—DaimlerChrysler. Most of us would want a smattering of companies from across the spectrum. By putting each company in context and paying special attention to how it measures up against others in its age bracket, we can do just that.

 
     
  Sustainable Growth Rate (stocks only)  
  Sustainable growth rate is the approximate rate at which a company could grow using internally generated cash without issuing additional debt or equity. For example, if a company’s sustainable growth rate is 12%, it should be able to boost future earnings at a rate of up to 12% per year without having to raise new cash through financing. Sustainable Growth Rate indicates how fast a company can grow given its current profitability, dividend policy, and debt levels. The sustainable growth rate equation accounts only for growth the company can fund from internally generated resources. It doesn’t account for growth the company may fund from increasing debt levels or issuing additional equity.  
     
  Tax Cost Ratio (funds only)  
 

Time Periods: 3 Year, 5 Year, 10 Year, 15 Year

This represents the percentage-point reduction in an annualized return that results from income taxes. The calculation assumes investors pay the maximum federal rate on capital gains and ordinary income. For example, if a fund made short-term capital-gains and income distributions that averaged 10% of its NAV over the past three years, an investor in the 35% tax bracket would have a tax cost ratio of 3.5 percentage points. (The 35% tax rate was used for illustrative purposes because, according to current tax law, the maximum income-tax rate will fall to that level. However, our tax-cost calculation uses the maximum income-tax rate that applied during the year in which the distribution was made.)

 
     
  Ticker  
  This symbol represents a fund's or a company's stock on an exchange. The ticker can be the most dependable way to identify a security, because it is less likely to change than a security name. Ticker symbols for companies listed on the NYSE or AMEX are up to three letters long. Companies traded on the Nasdaq National Market or Nasdaq Small-Cap exchanges commonly consist of four to five letters. Tickers for multiple share classes of stocks are denoted with a period followed by the share class letter. For example, the ticker symbol for the A shares of j.M. Smucker is SMJ.A.  
     
  Today’s High ($) (stocks only)  
  The highest price reached during the course of the day.  
     
  Today’s Low ($) (stocks only)  
  The lowest price reached during the course of the day.  
     
  Total Cost of Position ($)  
  Total cost is calculated by multiplying the cost per share by the total number of shares. It represents what you paid for all of the shares you currently hold. Note that commissions are added to costs.  
     
  Total Number of Holdings  
  Total number of holdings is the number of securities in a mutual fund’s portfolio. The lower this figure, the more concentrated a fund is in a few companies or issues, and the more it is susceptible to market fluctuations in these few holdings’ prices. This figure also provides a context for the importance of % assets in top 10 holdings. The figure is calculated from the most recently available fund holdings and does not include short positions.  
     
  Trailing Returns  
 

Time Periods: YTD, 1 Week, 4 Week, 3 Month, 12 Month, 3 Year, 5 Year, 10 Year, 15 Year

Stocks:
Trailing returns represent shareholders’ gain or loss from a stock over a given period of time. Returns include both capital gains and losses (the increase or decrease in the stock price) and income (in the form of dividend payments). They are calculated by taking the change in the stock’s price, reinvesting all dividends, dividing by the initial stock price, and expressing the result as a percentage. Returns for periods longer than one year are annualized.

Funds:
All references to total return represent a fund's gains over a specified period of time. Total return includes both income (in the form of dividends or interest payments) and capital gains or losses (the increase or decrease in the value of a security). Morningstar calculates total return by taking the change in a fund's NAV, assuming the reinvestment of all income and capital gains distributions (on the actual reinvestment date used by the fund) during the period, and then dividing by the initial NAV. Data for 10 Year and 15 Year are as of the latest month-end.

 
     
  Turnover Ratio (funds only)  
  Turnover ratio is a measure of the fund’s trading activity. It is computed by taking the lesser of the value of all purchases or sales (excluding all securities with maturities of less than one year) and dividing by average monthly net assets. In practical terms, the resulting percentage loosely represents the percentage of the portfolio’s holdings that have changed over the past year. A low turnover figure (20% to 30%) indicates a buy-and-hold strategy. High turnover (more than 100%) would indicate an investment strategy involving considerable buying and selling of securities.