Managers & Models

Morningstar Hare and Tortoise Models

Morningstar Select Equity Portfolios embody a long-term, bottom-up, valuation-driven approach to investing focused on companies Morningstar believes are the most attractive stocks for the long run. It prefers high-quality companies with durable moats, steady profits, healthy balance sheets, and strong free cash flows that trade at attractive discounts to their intrinsic value, believing companies with these characteristics should be able to defend or grow their market position over time. The focused portfolios typically own 20–40 high conviction stock ideas.

Two of the Morningstar Select Equity Portfolios are the Hare and Tortoise models available in the Freedom Advisors Model Marketplace. These portfolios cater to different investor profiles through contrasting approaches:

Hare:

• Investment Process: Actively selects high-quality companies with significant competitive advantages and undervalued stock prices, using the “growth at a reasonable price” (GARP) methodology, seeking companies with above-average earnings per share.
• Portfolio Construction: Dynamically allocates across sectors based on attractiveness and conviction. Typically holds 20-40 stocks with a minimum 80% allocation to US equities.
• Risk Profile: More aggressive, seeking higher returns with potential for larger fluctuations. Suitable for investors with a longer investment horizon and higher risk tolerance.

Tortoise:

• Investment Process: Focuses on undervalued companies with stable businesses, consistent cash flows, and durable competitive advantages, focusing on financial strength, dividend history, and long-term potential.
• Portfolio Construction: Less sector rotation, prioritizing diversification across industries and styles. Typically holds 20-40 stocks with a balanced global allocation.
• Risk Profile: More conservative, aiming for steady growth with lower volatility. Suitable for investors seeking capital preservation and income generation.

Conclusion: A Dynamic Duo in the Investment Landscape

The Morningstar Hare and Tortoise models, collectively, offer a comprehensive approach to navigating the equity landscape. While Hare employs a GARP strategy for long-term capital appreciation, Tortoise enhances the overall portfolio by providing prudence and stability through strategic exposure to commodities. The combination of a meticulous investment process, fundamental diversification, and continuous monitoring positions this dynamic duo as a compelling choice for investors seeking a balanced and resilient investment strategy.