Ironically Good Companies, Top Manager Retires, and Stock of the Week

And practicing gratitude. [Morningstar](?utm_source=eloqua&utm_medium=email&utm_campaign=newsletter_smartinvestor&utm_content=32960&elqTrackId=bc11d2c5d73648e08963c8f66616d415&elq=c8d21a2549834a37bfb00d9553971d52&elqaid=32960&elqat=1&elqCampaignId=15264) [Smart Investor] Smart Investor with [Susan Dziubinski, Director of Content]( [Susan Dziubinski] Good Companies, Not So Good ManagersIn [this week’s Our Picks]( column, I looked at companies that one might call “ironically good”: companies that have built significant competitive advantages despite the poor decisions their managers have made when it comes to balance sheets, investments, and shareholder distributions. Specifically, 13 companies that our analysts cover earn wide or narrow [Morningstar Economic Moat Ratings]( and poor [Morningstar Capital Allocation Ratings](. To no one’s surprise, management at [Wells Fargo]( makes the list of poor capital allocators. Senior analyst [Eric Compton]( argues that management’s lack of investment in internal risk monitoring and operation controls--and its foot-dragging on improving the bank’s internal regulatory shortcomings--have destroyed shareholder value. Nonetheless, we think the bank possesses a stable, wide moat based on its cost advantages and switching costs. See the irony? To find out what other companies made our list, [check out the column](. Funds and Key-Person RiskSpeaking of managers--and in this case, an exceptional one--Fidelity revealed this week that Joel Tillinghast, the longtime skipper of Fidelity Low-Priced Stock FLPSX, will [retire in late 2023](. Tillinghast has led the fund since 1989 and is regarded as one of the industry’s best value investors. After Morningstar awarded Tillinghast an [Outstanding Portfolio Manager award]( in 2021, he shared some [lessons learned]( during [our annual conference](. My favorite: “The biggest learning of the pandemic is that I’m an idiot.” Hardly! But his modesty is refreshing in an industry rife with self-proclaimed gurus. We’ve placed our Morningstar Analyst Rating for Fidelity Low-Priced Stock under review as our analysts digest the news. We don’t always change our ratings because of fund manager departures--[many factors come into play](. But just a few months ago, we identified the fund as one of four facing [significant key-person risk]( noting that the fund’s reliance on Tillinghast makes its future uncertain after he departs. In fact, the firm is home to several terrific stock-pickers--including Fidelity [Contrafund’s FCNTX Will Danoff]( and Fidelity Growth Company’s FDGRX Steve Wymer--who put their own unique stamp on their funds, thereby making it more challenging to replace them when they eventually move on. Stock of the WeekWhere do we turn when our favorite brand of detergent becomes too expensive or ground beef gets too pricey? Evidently, to Walmart. Walmart WMT reported solid third-quarter results as shoppers sought lower prices as [inflation]( continued to pinch pocketbooks. “Walmart’s purchasing power and cost leverage are unparalleled, in our view, and so the company should be in a better position to secure products economically than smaller rivals,” says analyst [Zain Akbari]( in his [Stock Analyst Update](. “The inflationary environment provides some cover for the retail juggernaut to boost prices as well, particularly as customers look to the gaps between Walmart’s pricing and that of its rivals.” Although Akbari says we plan to modestly raise our fair value estimate on the [wide-moat]( retailer’s stock, shares nevertheless look about fairly valued to us. ThankfulnessThis is the last issue of Smart Investor before Thanksgiving, which ushers in a season of giving. It’s a time to find our good and act on it. That may mean giving your time to a food bank. Or sharing your special talents with a senior center. Or supporting the charitable acts of the children in your life, whatever they may be. It may also mean donating money to causes that matter to you. This week, my colleague [Christine Benz]( shared her pointers for how to [check up on a charity]( to make sure your dollars are being effectively spent. She’s also shared charitable strategies to pursue--such as [donating appreciated stock]( [contributing to a donor-advised fund]( or [making a qualified charitable distribution from an IRA]( in addition to helping others, may also yield tax benefits to you. I hope readers in the U.S. have a lovely Thanksgiving. You’ll receive your next issue of Smart Investor on Dec. 3. ADVERTISEMENT [media]( [media] Morningstar Specialists [The Great Disappointment of Active Share]( [The Great Disappointment of Active Share]( Overselling a bright idea. John Rekenthaler [Yes, Fancy Climate Summit Means Small Investors Must Be Vigilant, Too ]( [Yes, Fancy Climate Summit Means Small Investors Must Be Vigilant, Too]( Vote your shares, make sure your fund manager has a net-zero plan, and look at opportunities in climate solutions, experts say. Leslie Norton [These Charitable Investment Strategies Deliver a 'Three-fer']( [These Charitable Investment Strategies Deliver a 'Three-fer']( These three maneuvers will tend to deliver a higher tax benefit than writing a check and deducting it, and may even improve your portfolio. Christine Benz [Which Charities Deserve Your Dollars?]( [Which Charities Deserve Your Dollars?]( Charitable giving offers valuable tax breaks, but it's also worth checking up on a charity's effectiveness. Christine Benz [ESG Ratings Are Now Available for Bond Funds, Allocation Funds]( [ESG Ratings Are Now Available for Bond Funds, Allocation Funds]( A change to the Morningstar Sustainability Rating methodology means we can rate more funds, in more categories. Karen Wallace, CFP® [Robin Wigglesworth: The Rise of Index Investing and the 'Renegades' Who Ushered It In]( [Robin Wigglesworth: The Rise of Index Investing and the 'Renegades' Who Ushered It In]( The Financial Times’ correspondent discusses his new book on the history of index funds and the remarkable people who brought indexing into the mainstream. Christine Benz, Jeffrey Ptak, CFA [What to Consider When Shopping for a 529 Plan]( [What to Consider When Shopping for a 529 Plan]( Savers' goals aren't all the same. Susan Dziubinski, Adam Millson [13 Good Companies Run by Poor Capital Allocators]( [13 Good Companies Run by Poor Capital Allocators]( These firms all have wide and narrow economic moats but earn poor capital allocation ratings. Susan Dziubinski [The Hidden Costs of Free Investment Services]( [The Hidden Costs of Free Investment Services]( Looking gift horses in their mouths. John Rekenthaler [How Useful Is It to Close Funds?]( [How Useful Is It to Close Funds?]( No one likes a bloated fund. Russel Kinnel [5 Tips for Getting the Most Out of a Health Savings Account]( [5 Tips for Getting the Most Out of a Health Savings Account]( Maximize the benefits of these accounts. Christine Benz, Susan Dziubinski Popular This Week [2 Sectors With the Largest Fair Value Increases]( We raised our expectations for many energy and technology stocks, but are there any opportunities as a result? Jakir Hossain [You Probably Own Too Much Domestic Equity]( Home bias is a global phenomenon that reduces diversification. Todd Trubey [What’s Next for Rivian After a Supercharged IPO?]( Even with a sound business strategy, hot new stocks often run out of steam. Margaret Giles, Tom Lauricella [Why Investors Can't Ignore Tesla]( 5 charts on Tesla's growing influence in the stock market. Lauren Solberg [Best Funds in Fidelity's Sweet Spot]( Our favorites from Fidelity’s lengthy menu of large-growth funds. Robby Greengold, CFA Listen Now Get the latest investing insights and market updates with [Morningstar’s podcasts]( available on your iPhone, iPad, Android, PC, or smart speaker. Stay connected: [twitter]( [facebook]( [linkedin]( [instagram]( [YouTube]( [Apple News]( [View online]( | [See all newsletters]( | [Share your feedback]( [Unsubscribe]( from this newsletter. Or update your [email preferences](. © 2021 Morningstar, Inc. All Rights Reserved. 22 W. Washington St. Chicago, IL 60602