Morningstar Advisor - August/September 2011 - 66

Screens
More Bargain Than Bubble
By David Hirsch
Use this screen to find undervalued tech companies poised
to generate significant returns on their competitive advantages.
With the recent sizzling IPOs of LinkedIn LNKD
and Yandex YNDX, as well as the highly
anticipated offerings of Groupon and Facebook,
many investors have begun to worry
about the possibility of another bubble in
the technology sector.
While they may have a point in questioning
the rationale behind companies facing
near-term loss projections trading at around
1,000 times earnings, this fear has also
caused the market to shy away from wellestablished
tech companies with formidable
growth strategies. These companies
are all industry leaders offering attractive
margins of safety for investors.
Sector
5 Technology
We initiate the screen by narrowing it to
technology companies. The Morningstar
coverage universe extends to both foreign and
domestic firms.
And ( Economic Moat
Or
Economic Moat
5 Narrow
5 Wide
)
Because the technology sector is extremely
competitive, these criteria focus on companies
with already-defined economic moats. Having
competitive advantages provides a degree
of certainty in the company's ability to generate
returns on investment above its cost of
capital in a constantly changing environment.
And Morningstar Rating Overall . 4
In order to identify undervalued stocks, we
focus on companies that are trading at
severe discounts to Morningstar analysts'
fair value estimates. We believe the
market has significantly underestimated these
companies' earnings potential and these
equities will eventually converge to a much
higher valuation.
And Forward PE Ratio
, 10
To ensure we are not victim to a perceived
bubble, we have selected companies
that are currently priced at less than 10 times
their expected future earnings. Even if
these companies miss estimates, their trading
multiple will still likely be less than the
industry standard.
66 Morningstar Advisor August/September 2011

Morningstar Advisor - August/September 2011

Table of Contents for the Digital Edition of Morningstar Advisor - August/September 2011

Morningstar Advisor - August/September 2011
Contents
Contributors
Letter From the Editor
Simplicity and Design Matter
Do You Use ETFs Strategically or Tactically?
The Institutional Way
How to Analyze an ETF
Eyeing ETFs’ Next Chapter
Small-Cap/Large-Cap Flip-Flop?
Four Picks for the Present
Investment Briefs
Morningstar Investment Conference
Pitfalls of Peer Groups
A REIT Recovery, With a Catch
Turning Fund Distribution on Its Head
Here Come ETF Managed Portfolios
Circle These Picks Amid the Crop of New ETFs
ETF Analyst Favorites
Beware, the Accidental Portfolio Manager
It’s the Destination, Not the Vehicle
New Growth, Rooted in Experience
Better Ways to Look at ETFs
How to Better Manage Your Clients’ Future(s)
More Bargain Than Bubble
Cheap, Local, and On a Roll
Mutual Fund Analyst Picks
50 Most Popular ETFs
Undervalued Stocks With Wide Moats
First-Quarter Assets Hit an All-Time High
You Say You Want a Revolution?
Morningstar Advisor - August/September 2011 - Intro
Morningstar Advisor - August/September 2011 - Morningstar Advisor - August/September 2011
Morningstar Advisor - August/September 2011 - Cover2
Morningstar Advisor - August/September 2011 - 1
Morningstar Advisor - August/September 2011 - 2
Morningstar Advisor - August/September 2011 - Contents
Morningstar Advisor - August/September 2011 - 4
Morningstar Advisor - August/September 2011 - 5
Morningstar Advisor - August/September 2011 - Contributors
Morningstar Advisor - August/September 2011 - Letter From the Editor
Morningstar Advisor - August/September 2011 - Simplicity and Design Matter
Morningstar Advisor - August/September 2011 - 9
Morningstar Advisor - August/September 2011 - Do You Use ETFs Strategically or Tactically?
Morningstar Advisor - August/September 2011 - 11
Morningstar Advisor - August/September 2011 - The Institutional Way
Morningstar Advisor - August/September 2011 - 13
Morningstar Advisor - August/September 2011 - How to Analyze an ETF
Morningstar Advisor - August/September 2011 - 15
Morningstar Advisor - August/September 2011 - Eyeing ETFs’ Next Chapter
Morningstar Advisor - August/September 2011 - 17
Morningstar Advisor - August/September 2011 - Small-Cap/Large-Cap Flip-Flop?
Morningstar Advisor - August/September 2011 - 19
Morningstar Advisor - August/September 2011 - Four Picks for the Present
Morningstar Advisor - August/September 2011 - 21
Morningstar Advisor - August/September 2011 - Investment Briefs
Morningstar Advisor - August/September 2011 - 23
Morningstar Advisor - August/September 2011 - 24
Morningstar Advisor - August/September 2011 - 25
Morningstar Advisor - August/September 2011 - Morningstar Investment Conference
Morningstar Advisor - August/September 2011 - 27
Morningstar Advisor - August/September 2011 - Pitfalls of Peer Groups
Morningstar Advisor - August/September 2011 - 29
Morningstar Advisor - August/September 2011 - 30
Morningstar Advisor - August/September 2011 - 31
Morningstar Advisor - August/September 2011 - A REIT Recovery, With a Catch
Morningstar Advisor - August/September 2011 - 33
Morningstar Advisor - August/September 2011 - 34
Morningstar Advisor - August/September 2011 - 35
Morningstar Advisor - August/September 2011 - 36
Morningstar Advisor - August/September 2011 - 37
Morningstar Advisor - August/September 2011 - Turning Fund Distribution on Its Head
Morningstar Advisor - August/September 2011 - 39
Morningstar Advisor - August/September 2011 - Here Come ETF Managed Portfolios
Morningstar Advisor - August/September 2011 - 41
Morningstar Advisor - August/September 2011 - Circle These Picks Amid the Crop of New ETFs
Morningstar Advisor - August/September 2011 - ETF Analyst Favorites
Morningstar Advisor - August/September 2011 - Beware, the Accidental Portfolio Manager
Morningstar Advisor - August/September 2011 - 45
Morningstar Advisor - August/September 2011 - It’s the Destination, Not the Vehicle
Morningstar Advisor - August/September 2011 - 47
Morningstar Advisor - August/September 2011 - 48
Morningstar Advisor - August/September 2011 - 49
Morningstar Advisor - August/September 2011 - 50
Morningstar Advisor - August/September 2011 - 51
Morningstar Advisor - August/September 2011 - 52
Morningstar Advisor - August/September 2011 - 53
Morningstar Advisor - August/September 2011 - New Growth, Rooted in Experience
Morningstar Advisor - August/September 2011 - 55
Morningstar Advisor - August/September 2011 - 56
Morningstar Advisor - August/September 2011 - 57
Morningstar Advisor - August/September 2011 - Better Ways to Look at ETFs
Morningstar Advisor - August/September 2011 - 59
Morningstar Advisor - August/September 2011 - 60
Morningstar Advisor - August/September 2011 - 61
Morningstar Advisor - August/September 2011 - How to Better Manage Your Clients’ Future(s)
Morningstar Advisor - August/September 2011 - 63
Morningstar Advisor - August/September 2011 - 64
Morningstar Advisor - August/September 2011 - 65
Morningstar Advisor - August/September 2011 - More Bargain Than Bubble
Morningstar Advisor - August/September 2011 - 67
Morningstar Advisor - August/September 2011 - Cheap, Local, and On a Roll
Morningstar Advisor - August/September 2011 - 69
Morningstar Advisor - August/September 2011 - Mutual Fund Analyst Picks
Morningstar Advisor - August/September 2011 - 71
Morningstar Advisor - August/September 2011 - 72
Morningstar Advisor - August/September 2011 - 73
Morningstar Advisor - August/September 2011 - 50 Most Popular ETFs
Morningstar Advisor - August/September 2011 - 75
Morningstar Advisor - August/September 2011 - Undervalued Stocks With Wide Moats
Morningstar Advisor - August/September 2011 - 77
Morningstar Advisor - August/September 2011 - First-Quarter Assets Hit an All-Time High
Morningstar Advisor - August/September 2011 - 79
Morningstar Advisor - August/September 2011 - You Say You Want a Revolution?
Morningstar Advisor - August/September 2011 - Cover3
Morningstar Advisor - August/September 2011 - Cover4
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