Morningstar performance

[1/20/06] In this update, Morningstar reports their star rating system is just about matching the equal-weighted S&P 500 for the trailing 3-year period while trouncing the cap-weighted index. Looking at the list, it would seem like the best buys right now are TGIC, WMT, KMX, LEA, PIR, TPX since they are all still rated 5 stars (and all have gone down).

[7/16/05] How well do Morningstar ratings perform? Morningstar started a study on 8/6/01 where they bought five stars stocks and held them until they became one star stocks. It has outperformed the S&P 500, though it's about par for the cash-flow matched equal-weighted S&P 500. That comparison index may be a little unfair because it doesn't sound easy for the individual to replicate. In any case, they're both trouncing the S&P 500. Even the equal-weighted S&P 500 (where each stock is given equal weight in the index) sounds like a good strategy since it's also been beating the plain S&P 500.