That may be, but the Morningstar newsletter has become the “bible” among financial planners, individual investors and financial journalists. Circulation has grown to 50,000. Mutual funds crow when they’re awarded four or five stars, the newsletter’s top rankings. Morningstar’s authority is so pervasive that even Value Line defers to it. When asked about the performance of Value Line’s own mutual funds, asset-management chief John Moore will tell you how many stars his funds have collected from Morningstar.
Morningstar has targeted other investment topics that Value Line ignored for years. For example: it publishes news-letters on variable annuities and closed-end funds. And it recently began mailing a tome on another hot topic among investors: foreign stocks that trade on U.S. exchanges. Nearly 4,000 subscribers have signed up in just three months. Morningstar’s latest venture is on Value Line’s home turf- U.S. stock research. According to Morningstar founder Joe Mansueto, the company is selling software that allows individual investors to analyze financial data from 6,000 companies on their computers for as little as $55.
Value Line has struck back, with mixed results. Last fall Buttner launched a mutual-fund survey aimed at cracking Morningstar’s lock on the market. It’s 8100 cheaper than Morningstar’s publication and covers more companies. But Value Line’s fund survey hasn’t made a lasting impression among the most important group of customers–financial planners-who say Value Line’s product is too similar to Morningstar’s.
Maybe that’s why the competition is getting so nasty. Earlier this year a Wall Street Journal story cited instances in which Value Line’s analysts had written mutual-fund reports that were nearly identical to Morningstar’s. Buttner accuses Morningstar of planting the story. Her editor, Steve Savage, adds that the plagiarism charges are “ludicrous.” Morningstar, meanwhile, is angry about Value Line’s ads, one of which displays a list of funds and says: “God luck finding these mutual funds in Morning-star.” “They didn’t do their homework,” says publisher Don Phillips. “We’ve covered many of those funds for eight years, and they’ve covered them for eight months.”
Not every Morningstar innovation is a hit, of course. A newsletter on Japanese stocks flopped. Professional investors loved it, but there weren’t enough customers to make the product profitable. Morningstar’s famous star system has also come under fire for being a poor predictor of a fund’s performance. And for all its fancy footwork, Morningstar has admitted that it hasn’t turned a profit, which Value Line’s Buttner likes to note, “We are not in business to lose money,” she says.
Arguably, the two companies’ final baffle will be on the Information Superhighway. And again, Morningstar appears to have the edge. It already sells its mutual-fund data on computer discs and CD-ROMs, Last week Mansueto visited Apple executives to explore putting Morningstar on e-World, the computer company’s new online network. Ladies and gentlemen, start your engines.
