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So, is Morningstar Premium worth the money?
How reliable are Morningstar ratings?
Can it really help you make better investment decisions and achieve above-average returns?
Also, how does Morningstar Premium compare with other subscription-based stock investment services such as Yahoo Finance Premium and Motley Fool?
After trying out ALL the above, here’s a very detailed comparison including both the pros and cons of each stock investment service.
Hopefully, you will find it useful and time-saving (possibly money-saving too).
Now, let’s first take an in-depth look at Morningstar Premium.
Morningstar Premium
The biggest selling point of Morningstar Premium would definitely be its ratings, stock research reports, and stock valuations.
First, let’s look at its individual stock analysis page.
Below is a screenshot of what you can expect after you enter a stock symbol.
As you can see from above, Morningstar Premium gives you all the basic financial and fundamental information on the stock.
This is not unique because generally all the stock research and analysis platforms provide you with almost the same data.
Now, what is unique to Morningstar are its analyst research reports and its ratings.
Morningstar analysts provide opinions on the latest news affecting a stock that you are interested in.
Also, they help you put into context recent news and events such as earnings releases, legislative changes, or global news events as well as talk about whether and how recent events impact the company’s fair value estimate or economic moat rating.
On top of that, it also assigns ratings to the stocks.
So, how exactly does Morningstar rate stocks?
Morningstar adopts a stock-picking approach that focuses on long-term advantages and intrinsic value.
To help you gauge whether or not a company has “long-term advantages” over its competitors, Morningstar provides you with economic moat ratings for each stock.
There are three types of economic moat rating:
- Wide (i.e. highest moat rating)
- Narrow
- Non
Companies with a “Wide Moat” rating have the most sustainable competitive advantages.
And these companies are the best for long-term investments.
Below is a screenshot that shows a small section of the entire “Wide-Moat Stocks” list.
So, how do you know which wide-moat stocks you should buy and when you should buy them?
This brings us to Morningstar’s stock Star Rating.
Morningstar’s Star Rating gives you an idea of the stock’s current valuation.
In other words, it tells you whether the stock is above its fair value, below its fair value, or near fair value.
It’s calculated by comparing a stock’s current market price with Morningstar’s estimate of the stock’s fair value.
So, here’s how star ratings work.
The further the market price is below the fair value, the higher the star rating (with 5-star being the highest and 1-star being the lowest).
A 5-star rating means that the stock is trading meaningfully below fair value, which means it’s a good price to buy.
On the other hand, a 1-star or 2-star rating means that the stock is trading meaningfully above fair value.
A 3-star rating means the stock is trading near fair value.
Is Morningstar Fair Value Estimate reliable?
Morningstar calculates its fair value estimate based on its estimate of how much cash the company will generate in the future.
As you all know, no one can predict the future with 100% accuracy.
That’s why Morningstar takes into account “the predictability of company’s future cash flow”.
The less predictable (or uncertain), the higher the margin of safety is required for a 4-star or 5-star rating.
For example, Mcdonald’s future cash flow is more predictable and stable than Lions Gate Entertainment.
For Lions Gate Entertainment stock to be assigned a 4-star or 5-star rating, its current market price must be much much lower than its fair value estimate.
All in all, I think Morningstar ratings and fair value estimates are useful, but I would only use it as one of my sources to find investment ideas.
So, how do you use Morningstar Premium to find good investment ideas?
Personally, I like its “Wide-Moat + Undervalued Stock” list which shows you all the stocks with a Wide Moat Rating and a Star Rating of 4 or 5 stars.
Basically, you can find all the highest quality companies that are trading below their fair value on this list.
These are considered relatively safer stock picks than just picking a stock from the “Five Star” list or “Wide Moat” list.
If you are also investing in index funds, mutual funds, or bond funds, you can find Morningstar ratings on these funds.
Personally, I don’t recommend mutual funds.
This is because the majority of mutual funds underperform the market.
On top of that, they charge ridiculously high fees which will significantly reduce your investment returns in the long term.
Did you know how just a 1% increase in fees would impact your investment returns?
Let’s punch some numbers.
Scenario 1 (with 1% annual fee):
| Initial Investment amount | $100,000 |
| Annual Fee Charged by Mutual Fund | 1% |
| Annual Return of Mutual Fund | 6% |
| Number of Years Invested | 20 Years |
| Portfolio Value Without Fees | $320,713 |
| Portfolio Value With Fees | $262,313 |
| Reduction of Portfolio Value Due to Fees (%) | 18.21% |
Scenario 2 (with 2% annual fee):
| Initial Investment amount | $100,000 |
| Annual Fee Charged by Mutual Fund | 2% |
| Annual Return of Mutual Fund | 6% |
| Number of Years Invested | 20 Years |
| Portfolio Value Without Fees | $320,713 |
| Portfolio Value With Fees | $214,110 |
| Reduction of Portfolio Value Due to Fees (%) | 33.24% |
So, you can see the amount of money you could lose to fees is HUGE in the long term.
Now, what about ETFs?
If you are a passive investor, ETFs are a good choice.
But you should always choose high-quality ETFs with minimal fees.
Apart from the ratings and research report, Morningstar Premium also provides you with portfolio tracking and analytics tools.
But, that is actually nothing to be wowed about because you can find better (and free) portfolio management and analytics tools online.
So, how much does Morningstar Premium cost?
Morningstar Premium memberships are available at the following term lengths and prices:
- $29.95 for monthly
- $199 for annual plan (i.e. $16.58/month)
- $349 for two-year plan (i.e. $14.54/month)
- $449 for three-year plan (i.e $12.47/month)
Now, let’s go back to the important question.
Is Morningstar Premium worth it?
If you are a value investor who prefers to do your own research, then you might find Morningstar Premium ratings and stock picks useful.
I also like its “Bulls Say Bears Say” which gives you different perspectives on the same stock.
As an investor, I think it’s very important to hear from people with differing views because it makes you think more clearly about your own investment analysis and better understand the risks involved.
Try Morningstar Premium For 14 Days Free
However, I would recommend Stock Rover if you are a serious value investor who wants to dive deep into how a company is actually doing fundamentally and financially by yourself.
Why?
This is because Stock Rover is one of the most powerful stock research and analysis platforms with everything you need to do an in-depth fundamental analysis of every stock listed on the US and Canada stock exchanges.
Not only you would get access to all the fundamental and financial data of the company going back to at least 20 years, but you will also have research reports, analyst ratings, and the fair value of the stocks.
For Stock Rover‘s paid plans, there are three tiers:
- Essentials at $7.99/month (or $6.67/month if billed annually)
- Premium at $17.99/month (or $15.00/month if billed annually)
- Premium Plus at $27.99/month (or $23.33/month if billed annually or $19.95/month if billed for two years)
So, in terms of pricing, I would say you get much more value for your money with Stock Rover.
Try Out Stock Rover Risk-Free For 14 Days Now (No Credit Card Required)
Morningstar Premium Vs Motley Fool
Now, what about other Morningstar Premium alternatives?
Motley Fool Stock Advisor is one of the other good options you can consider.
So, what is the key difference between Morningstar Premium and Motley Fool?
Morningstar Premium provides you with ratings on stocks, bonds, ETFs, and mutual funds and research reports as well as stock picks based on its Star Rating and Moat Ratings.
Basically, what Morningstar Premium offers are tools that you can use to make your own investment decisions.
On the other hand, Motley Fool Stock Advisor gives you two specific stock picks every month that it thinks might outperform the market in the long term.
For every stock pick, it will not only tell you what price to buy, but it will also explain to you the reasons behind the “buy recommendation” and the potential risks involved.
On top of that, it will continue to keep you informed of any news or big price movement in the stock.
When it thinks it is the right time to sell, it will let you know too.
On the other hand, Morningstar Premium doesn’t give you specific stock picks.
Therefore, there is no track record of how Morningstar ratings have been performing compared to the S&P 500.
Below is the performance comparison between Motley Fool Stock Advisor and S&P 500 between 2002 and 2nd June 2022.
As of 2nd June 2022, average Motley Fool Stock Advisor recommendations have returned over 357% since inception while S&P 500 has returned 123%.
But, what about its individual stock picks?
This metric is important because I might not be buying every single stock recommendation made by Stock Advisor.
As of May 2022, Motley Fool Stock Advisor has had 171 stock recommendations with 100%+returns.
Here are just some of their best-performing stock picks:
- Amazon: it’s up 19,806%*
- Netflix: it’s up 23,901%*
- Walt Disney: it’s up 632%*
- NVIDIA: it’s up 16,423%*
- Shopify: it is up 4,107%*
- United Health Group: it is up 2,338 %*
[*Returns as of 31st Dec 2021. Past performance is no guarantee of future results. Individual investment results may vary. All investing involves risk of loss.]
Will the Motley Fool Stock Advisor always be right about their stock recommendations?
No, because no one can be right about their stock picks 100% of the time.
Let me sidetrack a bit here.
If any stock picking service tells you that they have a close to 100% success rate on their stock picks and can guarantee you high investment returns, you should definitely stay away.
Even Warren Buffet has loss-making stocks in his portfolio, but he still achieves above-average returns because a few big gainers in the portfolio can make up for the under-performers.
What I like about the Motley Fool Stock Advisor is that they are very open and transparent about their bad investments.
As a member, I can see the performance of ALL its past and current stock recommendations (even for closed positions).
For some other stock-picking services that I’ve tried, they don’t publish the performance of all their past and current stock recommendations, so it’s not easy for you to find out their true track record.
For example, the year 2022 has not been good for high-growth stocks because of rising interest rates and high inflation.
So, you can see a lot of Motley Fool Stock Advisor’s stock recommendations are not doing very well.
The truth is that other stock-picking services are not doing well either because of the stock market crash.
Do I still think it’s worth subscribing to the Motley Fool Stock Advisor?
My answer is yes.
The stock market goes up and down all the time.
Every few years, there is a bear market.
According to Peter Lynch who is a legendary fund manager, far more money has been lost by investors trying to anticipate correction than lost in corrections themselves.
In fact, I think the bear market is the BEST time to start investing in the stock market.
Why?
During a bear market, it’s more likely to find great businesses selling at very cheap prices because people are just selling out of fear when the business is still fundamentally sound.
A market crash is a time when huge wealth transfers from irrational and emotional investors to patient and rational investors.
So, if you are thinking of getting into stock investing, I highly recommend the Motley Fool Stock Advisor because I think there are a lot of well-researched stock recommendations with long-term growth potential.
Lastly, in terms of pricing, Motley Fool Stock Advisor costs the same as Morningstar Premium for the annual subscription, which is $199/year.
Right now, there’s a special limited-time $79 offer* for new members for the first year when you click the link here to try it out for 30 days with a Membership-Fee-Back Guarantee. (*Billed annually. Introductory price for the first year for new members only. First-year bills at $79 and renews at $199)
So, for $79 a year- that’s just $1.60 a week – you can gain unlimited access to their library of expert stock recommendations which are carefully selected to help you grow your wealth.
Limited Time: Special $79 Stock Advisor Introductory Offer For New Members
Morningstar Premium Vs Yahoo Finance Premium
Next, let’s compare Morningstar Premium with Yahoo Finance Premium.
Both are stock research and analysis tools (i.e. research reports, charts, financial data, etc) that you can use to help you make your own investment decisions.
The key difference is that Morningstar Premium provides you with stock ratings on Economic Moat and Valuation to help you find high-quality companies at a good price for your long-term investment.
On the other hand, Yahoo Finance Premium helps you find long-term stock ideas based on valuation and also short-term trading picks based on chart patterns.
It might seem that you are getting the best of both worlds from Yahoo Finance Premium, but I feel that what it offers is too simplistic and basic.
For example, if you are serious about short-term trading, then you might prefer to have powerful trading software with more advanced charting tools as well as a dynamic stock scanner that can help you look for high-probability trade setups in real-time.
Or if you are a serious long-term investor who prefers to do your own fundamental analysis of the listed companies, then I would recommend Stock Rover because both Morningstar Premium and Yahoo Finance Premium might not have all the data and tools that you need.
So, who is Morningstar Premium right for?
Morningstar Premium is right for passive long-term investors who prefer to use Morningstar ratings to pick stocks.
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