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Morningstar 5-Star Stocks Top 10 (2025.08) Verify technicals strengths, buy sell confidently
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Get a second opinion on 5-star stock best picks by Morningstar.
They may be right long-term, but short-term movements matter too. That's where technical analysis comes into play. We analyzed up to 25 years of data with back tests to demystify technical indicator win rates and performance. We’ll help you decode the current technical strengths and signals, giving you the insights you need to make smarter decisions.
Ready to dodge buyer’s remorse? Let’s dive in.
Doing homework...
Top 5 star stocks from Morningstar
| Company | Ticker |
|---|---|
| Campbell’s | CPB |
| Yum China Holdings | YUMC |
| Coloplast | CLPBY |
| GSK | GSK |
| Constellation Brands | STZ |
| Bristol-Myers Squibb | BMY |
| Brown-Forman | BF.B |
| Clorox | CLX |
| Zimmer Biomet | ZBH |
| Diageo | DEO |
| Updated on: 2025-08-01 | |
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What Is 5-Star Stock?
5-star stock is a way of saying that a stock might be a really good deal. Companies like Morningstar, rate stocks from 1-star (expensive) to 5-stars (a great deal). If a stock gets 5 stars, it means it's selling for a much lower price than experts think it's actually worth. This could be a sign that it's a good time to buy that stock.
Morningstar has an army of fundamental research analysts pouring through company financial statements. Their mission is to find out what a company is worth. In other words, the fair value of a stock price. Usually, when a stock price is 60-80% below (20-40% discount) what Morningstar thinks is worth, they will give it a 5-star rating.
For more details, please refer to this PDF on Morningstar's methods.
The main benefit for a rating system...
Is that you can quickly understand if a stock is worthwhile in your portfolio, month after month. In other words, a small fee for someone to do the homework for you.
In this guide, we will explore:
Why Is 5-Star Stocks Important?
A SHORTCUT to find best stock ideas, using Morningstar's 5-star stock list.
Saves You Time
According to Benzinga, there are approximately 6,000 stocks in the U.S.
To quote the Sage of Omaha (Warren Buffett):
If you like spending six to eight hours per week working on investments, do it. If you don't, then dollar-cost average into index funds.
Do you have 48,000 hours for stock research? That is 5.5 years 24/7 non-stop.
If you are a firm believer in fundamental analysis, then 5-star stocks list may save you some time.
Our Brain Loves Lists
Lists are our way of making sense of the many things around us. This BBC article listed out 9 reasons why we love lists. We have a natural attraction to lists. We process lists with efficiency, and recall with ease.
With the ability to screen, sort and analyze stock opportunities on the list, our brain is in a happy place.
This may be why we believe a list of 5-star stocks helps us make investment decisions with confidence.
Great Minds Think Alike
When making an important decision, we'd like someone to reaffirm our thinking. If we think a stock is great and is also on the 5-star stock list, we know what to do next.
Confirmation bias is when people focus more on information that they already believe. The downside is ignoring information that is against their prior beliefs.
Seeing your favorite stock with a 1-star rating, you may feel angry. Yet, a great stock can also be too expensive for the moment. To chase or not to chase?
Independent Advice
When a large Wall Street firm has a "buy" rating on a stock, shouldn't we all jump in?
Not so fast...
As for butter versus margarine, I trust cows more than chemists.
Sell side analysts may benefit or indirectly earn a fee from the company they are promoting.
Morningstar is an independent research company, which means they get paid by you only if the advice works.
Is It Worth Paying for 5-Star Stocks?
Currently, Morningstar's 5-star stocks (Morningstar Investor, along many other features) is US$249 per year (or $20.75 per month) for an annual subscription. Monthly subscription is at US$34.95 per month.
Is 5-star stocks worth it? I will try to answer this question from 3 angles:
1. What Morningstar Say Themselves
In 2018, Morningstar analyzed the performance of their star ratings system for stocks. The study looked at their recommendations from Jun 2001 to Dec 2017 for 1-5 star stocks.
Although the study is a few years old, looking back 16.5 years makes it a meaningful study. The study period included 2 major bear markets and 4 smaller corrections:
Bull Market: 8.8 years (2009/03 to 2017/12)
Bull Market: 5.2 years (2002/07 to 2007/10)
Corrections: 2010, 2011, 2015, 2016
Bear Market: Global Financial Crisis (2007/10 to 2009/03)
Bear Market: Dot Com Bubble (2001-2003/07)
Moreover, Morningstar's stock star rating started in 2001. The review period is from Day 1 of their star system.
Here are Morningstar's own findings on performance.
Does it Beat the Market?
Morningstar measured the total return of each stock from every day that a star rating was assigned for the subsequent three-year period.
Here is the average per year result on all 1-5 star rated stock calls made in 16.5 years:
Rating | Total Return | Excess Return |
5-Star | +12.2% | 0.0% |
4-Star | NA | +2.6% |
3-Star | NA | +0.6% |
2-Star | NA | +1.8% |
1-Star | +9.0% | -1.2% |
Total Return is annualized return per year.
Excess Return is the median data by how much Morningstar beat the market.
By this measure, Morningstar is on par with its benchmark for 5-Star Stocks.
The 2018 report from Morningstar also included 2 other approaches to measure performance. One is Fama-MacBeth cross-sectional regression procedure, which showed Morningstar's system worked well. Another one is taking the stock calls made as a portfolio, which has mixed results.
I showed the most straight forward approach with the least adjustments made.
I respect Morningstar for their objectivity in the study. It takes courage to post and keep the results online. Most firms will only show results that portray them in the best light.
2. What People Say Online
This is an unscientific method for curating online comments.
Honestly, the Reddit comments surprised me.
Article Reviews
Let's start with mainstream media first.
I picked articles from media that usually dominate search results for investment topics. Some articles included advertiser disclosures, but they insist no impact on reviews.
Articles reviewing Morningstar as an investment tool have a favorable view. NerdWallet, Moneywise and Benzinga are generally impressed by the research quality of Morningstar.
Positive Reviews(Click image to see post) |
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Benzinga praised the user interface for being easy to use. Yet, Trustpilot reviewers' main complaints were about the interface.
Articles reviewing Morningstar's 5-star system are more critical. In 2017, Wall Street Journal studied performance on Morningstar's 5-star ratings for funds. Investopedia quoted a study by Vanguard in 2013 also on the 5-star rating of funds.
Negative Reviews(Click image to see post) |
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After Wall Street Journal's reporting, CNBC asked investment advisors about Morningstar. Mark G. Smith, CFP, president of Vision Wealth Planning, said:
I think Morningstar ratings ... give investors comfort, but comfort doesn’t have anything to do with the predictability of future returns.
Discussion Forums
Given the mainstream media comments, I thought the discussion forum would roast Morningstar.
Surprisingly...
People in the discussion forums are less harsh than expected.
Actually, I sense more lovers than haters. The positive comments made it to the top with more upvotes. Lovers are quite specific about what they like and don't like.
Online Comments(Click image to see post) |
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Despite what internal and external studies concluded about the 5-star system, Morningstar do seem to have a loyal following.
3. Actual Performance of 5-Star Stocks
In real live trading, how did Morningstar's 5-star stocks perform?
Did it beat the market? (more on that later)
Let's look at an ETF that replicates the Morningstar Wide Moat Focus Index.
The VanEck Morningstar Wide Moat ETF (Ticker: MOAT).
This ETF invests in US stocks that are:
5-Star Stocks: Trading at the lowest current market price / fair value.
Wide Moat: Has wide competitive advantages, as determined by Morningstar.
Compare with S&P 500 Index
Here are the results of the VanEck Morningstar Wide Moat ETF compared against the S&P 500 index.
If you parked $10,000 in MOAT since early 2012, your capital will increase to $50,361 after 12.9 years. Net profit is 403.6% vs. 302.5% from S&P 500 index (.SPX). That is very impressive considering MOAT's returns are:
After transaction fees to buy / sell stocks.
After management fees (expense ratio of 0.47%).
From an annual return view, MOAT on average returned 13.4% per year, while S&P 500 was 11.4%. MOAT's return was achieved with similar volatility to the S&P 500, with also similar max drawdown levels.
Compare with S&P 500 Equal Weighted Index
Morningstar's MOAT ETF invests in stocks on an equal weigted basis. This means each stock's position is similar. The S&P 500 index is weighted by market cap size, thus dominated by the Magnificent 7 stocks.
To be fair, we also compared MOAT against the equal weigted version of the S&P 500 index (.SPXEW). The equal weighted S&P 500 index is shared evenly by about 500 stocks, while MOAT has about 40-80 stocks. Let's take a look at the results:
Net profit is 403.6% vs. 234.7% from .SPXEW, that is even more impressive. On average MOAT returned 13.4% per year, while .SPXEW was 9.8%.
Risk Adjusted Returns
If we want to also factor in risk into return, we can compare their Sharpe Ratio. MOAT is about 38.5% more effective than the S&P 500 Equal Weighted Index (0.72 vs 0.52).
ETF / Index | Ticker | Sharpe Ratio |
|---|---|---|
VanEck Morningstar Wide Moat ETF | MOAT | 0.72 |
S&P 500 Index | .SPX | 0.68 |
S&P 500 Equal Weighted Index | .SPXEW | 0.52 |
Field Testing in a Bear Market
Let's also look at a bear market to stress-test the 5-star stocks.
During the 2019-2020 pandemic, MOAT initially was in sync with the market. In the second half of 2020, the S&P 500 index outperformed MOAT. In the same period, MOAT performed better than the equal weighted (.SPXEW) index.
Is this Smart Beta?
The ETF results from 5-star stocks appear to be more effective than the empirical studies. The 5-star stocks system has merits by this measure. MOAT has a Beta of 1.05 against the S&P 500 index. The Beta explains why it performs better in bull markets and worse in bear markets.
How to Use 5-Star Stocks Correctly
Masters of your own fate and captains of your own portfolio. Here are a few tips to have the 5-star stocks work for you with a correct mindset.
The Psycology of a Bottom Fisher
Fundamental value investors pride themselves on buying stocks at rock-bottom prices. One of the most famous bottom fishers, Warren Buffett said:
Be fearful when others are greedy, and be greedy only when others are fearful.
To catch a big fish, seasoned bottom fishers have the stomach to withstand the roughest seas. For beginners, simply being on a rocky boat may cause violent vomitting.
The basic tenet for 5-star stocks is to buy stocks trading at the lowest current market price / fair value. This concept is easy to understand.
The hard part?
Timing the market bottom... because no one has a crystal ball.
Let's look at an actual example from Morningstar.
Around May 2022, Morningstar reported:
As stocks slide into bear market territory, the number of companies whose stock valuations are dropping into the undervalued 5-star Morningstar Rating territory have reached levels not seen since the coronavirus pandemic selloff back in March 2020.
Sound attractive? Here's exactly how appealing Morningstar found it:
U.S. stocks now trade at an average discount of 15%... a total of 82 stocks became new 5-star-rated stocks and are trading at significant discounts—at 25% or more—creating an abundance of opportunities for eager long-term investors.
If you bought in May 2022, the market would slide another -10% for 5 months until bottoming in Oct 2022.
To be fair, the market also rebounded +9% after 3 months in Aug 2022. Yet, a true long-term investor will not sell only after 3 months... If unsold, the market dropped 17% afterwards.
Imagine the remosrse and regret for not selling earlier...
Long-term, Morningstar's 5-star stocks may be correct. Yet, prepare yourself mentally for a volitile ride, if you choose to be a bottom fisher.
Do You Like Ugly Duckings?
There is usually a catch for why the 5-star stock prices are so attractive...
It is because the news headlines are usually very scary.
Bottom fishing has risks because there is a lot of uncertainty about where prices will go in the future. It is impossible to judge whether this drop is temporary, permanent, or if a larger drop may soon follow.
Examples of bottom fishing include:
Buying bank shares during a financial crisis.
Investing in an aluminum company during a trade war.
Buying airline or cruise stocks during the pandemic.
The stock price chart of 5-star stocks may look like this:
5-star stocks may have the best looking fundamentals, but the worst looking stock price chart. This is why bottom fishing is considered an art... in picking ugly ducklings.
Avoid the Worst or Chasing the Best?
The worst and best days also tend to happen in a bear market.
In a study by Vanguard, as reported by Trustnet. If you can avoid the worst 10 days of the market, your average return gets bumped up by 27% (13.2% vs 10.4%).
In this chart by RIA Advisors and cited by Investing.com:
Missing the 10 Best Days would cost you about 50% of your capital gains. But, successfully avoiding the 10-Worst Days would have led to 250% the gains over “buy and hold.”
Sometimes stocks may not be the right asset class for the moment. Especially when the market is on the way down. Take a slight pause, revisit them when the coast is clear.
Yet, if you believe in "don't try to time the market" mantra, then be sure this buy & hold style fits your personality. Have a backup plan for emergency cash during hard times. Ready yourself for a further drop of 10-20%. Be patient for about 1-2 years. On the way up, don't sell too soon.
More Lens Bring More Clarity
The above bear market scenarios may be on the extreme side. After all, Bull markets are more common than bear markets for the US markets.
In normal market conditions, how might we maximize Morningstar's 5-star system?
Let's consider this analogy...
A telescope lets you see faraway stars and galaxies. A binocular is perfect for birdwatching or spotting wildlife, bringing nature closer. A magnifying glass is a tool for curiosity, helping you explore the tiny details of the world around you.
Fundamental analysis is a telescope. It helps you see possibilities 1 to 3 years down the road. Technical analysis is a binocular or magnifying glass. It helps you clarify the medium to short term.
To be a better investor, try pairing 5-star stocks with technical analysis.