Morningstar: Benefiting From ‘The Spitzer Push’

On January 23, Morningstar (MORN) was closing a bullish cup and handle formation. This past week, Morningstar popped out of its base, as expected, and jumped 382 bps on 4x average daily volume! Morningstar reported a stellar Q4 EPS number and it’s sent shares are up 19% in the last month alone.

Morningstar – which just went public last year, serves 185,000 financial advisors and 750 institutional clients through operations in 16 countries -- should continue to ramp up its product suite, attract new subscribers, and benefit from the contagious Wall St trend, post-Spitzer, to pay for independent 3rd party research. ROIC-infatuated and Graham-driven value hedge fund managers, moreover, cherish Morningstar’s differentiated research and we think Morningstar’s success is directly correlated with the fact that hedge fund assets have doubled to $1.43 trillion dollars over the last 5 years.

Although shares currently look rich at 51x trailing 12 EPS, analysts have yet to revise estimates or pick up any substantial coverage on this exciting name, which carries $145M in cash & zero debt. We would be compelled to own MORN ahead of Q1 FY07 numbers, expected on May 4th. BetaCracker, which hones in on mid-caps undergoing both heavy accumulation & explosive top line/EPS growth, isolated Morningstar as a ‘best in show’ in the Publishing industry.

Disclosure: Author has no position in MORN.

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Comments

[CevicheFundPartners LP]

MORN above 70 and it broke out again today...we rocked this one

dis- long MORN

[CevicheFundPartners LP]

one of our best calls -- MORN has nearly doubled! We have a 100 price target based off op leverage thesis

[CevicheFundPartners LP]

Stock was on a tear and pulled back to 60 amid overall market/systemic weakness - view this level as a buying op, reit buy, and would accumulate @ 50 if we can get it.

MORN remains a niche leader with proven management and a potential takeover candidate when growth slows 2-3 years out; 41 forward PE remains biggest risk.