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Morningstar Investment Research Take on the Facebook IPO

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I don't have a buy or sell stock pick this week as I usally do. Stocks are oversold and look like they could continue lower with the US Dollar heading higher for the time being. Instead this week I've got information on the Facebook IPO from Morningstar.

Facebook's debut has unsurprisingly been one of the most talked about tech IPOs in years. The sheer size of the offering, the ubiquity of its service, and the lack of growth elsewhere in the market has led to a very high level of interest from investors of all stripes. But is this excitement warranted?

To find out, we've cut through the hype and taken a deep dive into the company's fundamentals and its competitive advantages. The bottom line for investors, according to Morningstar's Rick Summer, is that Facebook is a wonderful wide-moat business. But a choppy growth trajectory will likely send shares lower at some point providing investors an entry point at a much more attractive valuation.

Facebook a Future Advertising Force

Morningstar's Rick Summer sees Facebook and Google dominating the Internet advertising market as Facebook finds better ways to monetize its massive user base.

Facebook Poised for Massive Revenue, Cash Flow Growth

Facebook's trove of data on its users is its ace in the hole as it races to develop new revenue streams.

How Facebook Dug Its Wide Moat

Facebook has a wide economic moat based on its 'social graph,' communications layer, and competitively advantaged platform for brands, application developers, and advertisers.

Full Facebook Analyst Report

Facebook has a bright future, but revenue growth and profits may stumble in the near term.

First Day Pop Doesn't Spell Long-Term Success for IPOs

Recent tech IPOs have had great first days, but performance has lagged since then, says Morningstar's James Krapfel.

How Facebook Will Sneak Into Your ETFs

Facebook will be added to the holdings of several of these exchange-traded funds soon. Other funds, however, won't be graced with the presence of the social-networking giant for weeks--or months--to come.

4 Things Not to 'Like' About the Facebook IPO

Facebook has a solid business right now, but keep these weaknesses in mind before getting too excited.

Facebook's $100 Billion Valuation May Not Be Heroic

It will be a volatile ride, but Facebook's strong competitive advantages and growth opportunities could be the recipe for a hefty valuation, says Morningstar's Rick Summer.

Investing in Facebook: An IPO for Fools?

Investing in the Facebook IPO might not get you the returns you are looking for in the long run.

Huge Facebook IPO, Small Impact on Funds

Facebook's IPO will be huge for company insiders and early investors, but it probably won't be as much a boon for mutual fund investors.

Nygren: Taking a Pass on Facebook

There are plenty of other more attractively priced businesses in the market right now, says Oakmark's Bill Nygren.

Click here for a free trial of Morningstar Investment Research and in depth analysis of the Facebook IPO along with the rest of the equities markets.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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May 19, 2012 - Institutions Are Buying These Stocks - By Zacks Investment Research

By: Brian Bolan

Big institutions run the market. They account for more than 70% of all the trading action. They spend millions on research and countless hours to determine which stocks to buy...something the little guy cannot replicate.

Few investors would want to get into a stock that they knew powerful institutions were selling. And conversely, many would want to buy into a stock these powerhouses were building large positions in.

Unfortunately these pros go to great lengths to cover their tracks. Gladly, they do leave a small trail of bread crumbs for us to follow. If you know where to look.

In this article I will share with you specifics on how to interpret and, better yet, profit from this trail of information that the smart money leaves behind. Let's get started.

You Have to Know Where to Look

By law, institutions that manage $100 million or more are forced to file with the SEC when they trade in a company in which they have a 5% stake or more. They are also forced to show all their holdings. But the holdings data is often stale and not worth as much as the newer, more voluminous filings.

Institutions have to file 13G, 13D and 13F forms with the SEC, and they are available for everyone to see. The information contained in these filings includes the dates they bought and/or sold and the amount of shares. Oftentimes, we see big institutions buying and selling the same name, so several filings for the same stock are likely.

There are two filings that hold the key to success. The 13Gs and 13Ds, which have to be published 10 days after an institution takes a 5% stake. That information is fresh and actionable. We learn what the big boys have been buying, and it is still timely as they are likely to continue to build their position depending on the stock.

Sounds easy?

Not so fast. First, you need a team of people to grab the mountain of filings in real time and get it into a database. Then you need to also have a firm understanding of who the players are in this game. What is their focus? Their current and past holdings? Their level of trading success? Are they a leader or a follower in the field? And much more.

Gladly, we here at Zacks have marshaled our resources to bring this to life. Here are some examples of what we have found to date.

From Theory to Action

Case in point would be the March 12, 2012 filing that FMR took a 14.99% passive stake in Threshold [THLD]. That is a lot of stock no matter the size of the company. Plus, it's FMR, which the common investor might not recognize, but when FMR is decoded into Fidelity Management & Research then it becomes a little clearer.

On March 12, when this information was disclosed, THLD closed higher by $0.10 to $6.56. A mere 16 days later on March 30, the stock closed at $8.80, a 34% increase. As a Zacks #2 Ranked stock at the time, this large trade was something that our resources alerted us to. The subsequent move higher in the stock was proof positive that following the smart money pays off.

Here is another great example. In early February 2012, a filing came across from an institution that is widely followed. Capital Research Global Investors announced that it now owned 2.8 million shares of LeapFrog Enterprises [LF]. That position of 5.8% of LeapFrog forced the filing when the stock was only at $6.83.

In the days following the initial 13G filing, we saw several other positions being made by other institutions, including another 5% position by LiteSpeed Master Fund. In less than three months' time, the stock closed at $9.34. The +36.8% gain told us we were on to something here.

Not All Institutional Trades Are Made Equal

Some institutions are well known for spectacular returns. They have earned their reputations over time with market beating performances. These are the thought leaders of industries. And these are the folks worth following.

The task is made difficult as they try to hide their fillings by changing CIK codes and other tricks up their sleeves. The other institutions keep track of the thought leaders so that when a hot hand announces a new position in a stock, we often see several other institutions pile on top.

This is the "monkey see, monkey do effect" that happens rather frequently. And those who have a technological advantage to mine this information can get in early to enjoy the ride higher.

And yes, Zacks does have that advantage in place.

What to Do Next?

Beat the big institutions at their own game with the Zacks edge. That's why we're introducing our latest service, Zacks Follow the Money Trader, so you can join the "smart money" as they ride the price of their stock buys up before the rest of the market catches on. I'll lead you through every step of the way as editor.

You're invited to become a Charter Member and receive our first moves along with explanations of why they're recommended. Demand is running high and available spots are already filling fast, so I suggest you look into this right away.

Good Investing, Brian Bolan

Brian is our Aggressive Growth Strategist and provides commentary and recommendations for the brand-new Zacks Follow the Money Trader.

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May 19, 2012 - Morningstar Investment Research 2012 Portfolio Makeover Week - by Morningstar Investment Research

It may be more of a suspicion than a conviction, a feeling that's built up, bit by bit, as you've opened your last few investment statements: Something's not quite right with my portfolio. Is it earning enough? Is it really on track? Is it too risky? Will it last?

There are many reasons a portfolio could use a makeover. Investments appreciate and depreciate, market forces sway, and--don't forget--you change, too. Your income, time horizon, expenses, and priorities shift over time. All can be good reasons to crack open your portfolio and take a closer look.

This week, Morningsta r director of personal finance Christine Benz helped a diverse group of investors do just that. She sized up their existing holdings and presented a suggested new lineup for investors in similar situations, while offering ideas on allocation, asset location, and possible upgrades. Benz also capped off the week with a Premium Member live Web seminar, "Make Over Your Portfolio for Retirement."

Whether you're juggling multiple investment needs, playing catch-up, moving into retirement, or hoping to leave a legacy, our makeovers have something to pique your interest.

Among the other topics we addressed this week:

Mind if I Borrow Your Shares? Under margin account rules, brokerages may loan out customer shares to cover other customers ' short sales.

A Least-Bad Option for Foreign Developed Equity Exposure. Large-cap U.K. stocks have good exposure to faster-growing emerging markets, have a defensive tilt, and are trading at attractive valuations.

Introducing Changes to Morningstar's Equity Valuation Methodology. We've enhanced our methodology, which could result in modest fair value changes.

What's Going on With Bond Fund of America? Recent changes to this fund's portfolio manager structure shows much tinkering going on.

Funds That Clear the High-Cost Hurdle. Despite high fees, these names still m anage to beat their peers.

Two Equity-Focused Inflation Fighters. Here are two favorite natural-resources funds from opposite sides of the oil patch.

A Fund Makeover With Positive Results. A former real-estate-focused fund morphed into a globally invested hybrid fund over the course of a few years.

Is Your Target-Date Fund's Glide Path Unstable? Morningstar Ibbotson research identifies which target-date series have the most- and least-stable glide paths.

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