Morningstar Stock Rating Performance Revisited

Morningstar has recently released its regular update on how well their stock rating system has been performing. If you were to buy their 5-star stocks and sell them at Fair Value, you would have trailed S&P 500 for the past year (11.2% vs 18.4%), but if you had followed this strategy since the inception of their stock rating system in 2001 you would have outperformed S&P 500 by 2.3% (7.9% vs. 5.6%).

They compare different strategies of using their rating system in comparison to S&P 500 performance in the full article: Stock Star Rating Performance Update.

Even though I wouldn't call these results mind-boggling, they did outperform the overall market in the long-term comparison. I also believe that this proves that Morningstar ratings are a great starting point for finding great stocks: if you can outperform the market by simply basing your buy/sell decisions on their star ratings, think how well you can do if you also apply your own analytical skills.