Morningstar, Inc. (MORN)

HLChin (92.28) Submitted: 7/02/08 3:18 PM : Start Price: $68.90 MORN Score: -5.13

Locked in positive CAPs gain. In again at a lower price. Sweet!
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I like Morningstar. A lot.

Reasoning: Business
• Joe Mansueto has 60% insider holdings
• Made out of three major segments – as of Sep 07
oIndividual segment (USD 89.6m) – premium membership or newsletters
oAdvisor segment (USD 109.6m) – serves financial advisors, broker
oInstitutional segment (USD 204.9m) –serves mutual fund companies, banks
• Growth by acquisitions and organic growth (27% growth last year)
o 2006: Purchased Ibbotson
o 2007: Purchased S&P fund data business
•Protective moat of huge databases, customer lists and a strong brand name.
•20% business overseas which has doubled over the past 12 months
•Singapore CPF board just tapped Morningstar for it’s services
•Endorsed by Tom and Dave’s dad as well as recocmended by John Bogle as a indicator of the consistency of performance of a mutual fund

Reasoning: Financials
•Asset light
•USD 193m in cash (almost half the sales in cash) and no debt
•Estimated 25% average earnings growth
•Improving gross profit (~74%) and operating margins (~28%)

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