The word coming out of Morningstar's [NASDAQ: MORN
] annual shareholder meeting is that the mutual fund tracker sees plenty of room for growth. Joe Mansueto
, the freshly minted billionaire and founder of the mutual fund reseach and investment analysis firm, shared his vision of the future with shareholders on Tuesday. And, while Mansueto does not see Morningstar becoming the Microsoft of the financial advice world, (a
misconstrued an analogy used by Mansueto during his talk and mistakenly reported those loftier ambitions), he does see it becoming more of an international presence.
First, let us address the misconstrued Microsoft ambitions, which an earlier version of this article picked up after this reported mistakenly placed his trust in the Sun-Times
(see correction below). Mansueto compared Morningstar's ability to tie together products for the retail, advisor and institutional channels to Microsoft using Office to create a suite of software applications.
Morningstar shareholders gathered for the annual meeting have reason to be pleased with Mansueto and his team. The company's stock now trades at nearly six times its trailing sales, a ratio at a premium to other information companies but one that gives it a market cap of just more than $2 billion. That market cap pales in comparison to Reuters
], which is valued at $15.7 billion, and Reuters buyer Thomson
], which sports a market cap of nearly $30 billion.
Mansueto pointed out that Morningstar has built strong audiances in the institutional, financial intermediary and consumer segments. That means the company offers products from the top to bottom of the financial services pyramid. "These three audiences reinforce each other, and give us critical mass," he said.
Also, spurring the talk could be Morningstar's 39-percent growth in topline revenue last year. The investment research company also reported operating profit margins of 25 percent, a figure that may fall short of early Microsoftian, but is nothing to sneeze at nevertheless.
That growth was pushed by a number of deals and quick increases in overseas revenues.
Earlier this year Morningstar picked up S&P's mutual fund tracking business for $55 million (which many in the fund industry may remember as Micropal). That deal was not included in Morningstar's most recent financial reports and should help boost growth when it is included in the 2007 numbers. The numbers were helped by earlier deals for retirement-related business, including the buyouts of Ibbotson Associates and mPower.
"The acquisition represents a hand-and-glove fit for us," Mansueto said about the S&P deal, which added sales both in the U.S. and internationally.
International revenues jumped 50 percent to $44.3 million and have currently reached a run rate of $60 million for this year, shared Mansueto. Those numbers were helped by Morningstar's pickup of Aspect Huntley Pty., an Australian provider of equity research. Morningstar spent $23.4 million on that deal. Chinese investors are also helping to drive overseas growth. Indeed, with 8 million page views a day, Morningstar's China Web site gets three times the traffic of the U.S. version.
"Our goal is to build the Morningstar brand overseas to the level it's at in the U.S. This acquisition will take us a long way towards that goal," he said in reference to the Aspect Huntley deal.
Mansueto outlined plans to build on this growth by creating a "super site" at Morningstar.com that folds together all of the company's services, including mutual fund and stock research, retirement planning tools and portfolio analytics. Stirred into the mix will be currency and commodities data as well as new hedge fund research.
He added that Morningstar product developers are working on new hedge fund research, retirement planning and portfolio analytics offerings.
The following is excerpted from Joe Mansueto's comments to Morningstar shareholders on Tuesday:
We divide the investor universe into three traunches Ė individual investors, intermediaries/financial advisors, and institutional investors. Our goal is to really build a leadership position in each of these market segments. And the way weíre doing that is by focusing on a flagsship Internet-based platform for each of these segments.
Itís our belief that investors really want integrated solutions. They donít want to have to stitch together solutions from many different vendors who may have incompatible methodologies or other elements of their database.
Itís a seamless, integrated package. So if you think of Microsoft Office, everything is there Ė Powerpoint, Excel, Word Ė they all talk to each other. You know, thatís our vision for an integrated solution.
Correction: An earlier version of this story unwisely relied on a story published in the Chicago Sun-Times. The MFWire has updated this story to clarify and correct Joe Mansueto's statements.
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