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Markets

Advisers for the Masses

What About Morningstar and Value Line?

You won't find two well-known stock-research firms, Morningstar and Value Line, in the Investars rankings. Why? Investars' rankings are primarily for the benefit of big institutions, such as pension and mutual funds. But Morningstar and Value Line aren't competing in that arena. They sell their research directly to individual investors. (The online version of Value Line Investment Survey costs $538 a year; Morningstar's online service costs $135 and includes mutual fund research as well.) So how can you tell whether their stock picking is up to snuff?

Both firms are tracked by Hulbert Financial Digest, which has been monitoring newsletters' stock picks since 1980. The Hulbert performance data won't tell you how well Morningstar and Value Line did compared with research firms ranked by Investars. But it will tell you whether the two stock-picking services consistently beat the market over time. And, in fact, both firms' stock picks have outpaced the market over the past five years.

Morningstar StockInvestor newsletter offers two sets of picks: a safety-oriented "tortoise" portfolio and a more aggressive "hare" portfolio. From July 31, 2001, when Morningstar launched the portfolios, through the end of 2005, the tortoise portfolio gained an annualized 9%, and the hare portfolio was up 5%. Both beat Hulbert's benchmark, the Wilshire 5000 index, which returned 4% annualized over the period.

Value Line Investment Survey, which has been published since 1931, has the second-best performance record of all newsletters Hulbert tracks, going back to 1980. More recently, the four portfolios in the Value Line newsletter returned an average of 7% over the five-year period through the end of 2005. The Wilshire 5000 gained an annualized 2% over the same period.

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