Morningstar, a leading investment research firm, has introduced its 'Buy the Unloved' approach for investors looking to make contrarian investment decisions in 2024. This approach recommends investing in Morningstar Categories that experienced the most outflows in the previous year, while avoiding categories with the most inflows. Morningstar's Version 1 of the approach, which has been applied for 30 years, has consistently outperformed the loved approach and the global large-stock blend Morningstar Category average. Version 2, launched in 2018, expands the eligible categories to include bond and allocation funds and has also shown decent performance in its shorter record [ea8c3c5c].
Morningstar provides specific investment ideas for each version of the approach. For Version 1, the unloved ideas include Dodge & Cox Stock, Schwab Fundamental US Large Company, MFS Growth, and T. Rowe Price Health Sciences. For Version 2, the unloved ideas include Fidelity Floating Rate High Income, Baird Short-Term Bond, and Fidelity Limited Term Municipal Income [ea8c3c5c].
This contrarian investment approach aims to identify undervalued investment opportunities by going against the market sentiment. Morningstar's research and expertise in analyzing fund flows and performance provide valuable insights for investors seeking potential investment opportunities. It is important for investors to carefully consider their investment goals, risk tolerance, and conduct thorough research before making any investment decisions.