this morning morningstar put out its annual report on fund flows for 2018 $207 billion went into passive those are index accounts that's jack bogle. $174 billion went out of active. ladies and gentlemen, jack bogle's legacy is very much with us i'm proud to say i too was a jack bogle disciple. >>> as we go to break, take a look at the markets. dow is down 58 points. movement in treasuries today, 2.73 back in a minute was ahead of its time. still, we never stopped making it stronger. faster. smarter. because to be the best, is to never ever stop making it better. the new 2019 c-class family. lease the c 300 sport sedan for $429 a month at your local mercedes-benz dealer. mercedes-benz. the best or nothing. the aarp auto insurance program from the hartford? let's take a ride with some actual customers and find out. - well, tell me about your experience when you switched to the hartford. - when i switched to the hartford, i'm sitting there thinking, "man, i should have "turned 50 years ago." they saved me a bunch of money. you can't beat that. - what blows me away about the hartford is thei

joining us is the senior equity analyst are morningstar and our own deirdre mow is a tell us exactly what the heck happened in uber in london >> uber's problems in london, they started back in 2017, and that was more of a corporate governance problem it was travis kalanick that was at the he helm. what's happened now, uber has received these 15-month extension, a two-month extension, and then last night they did not receive the extension at all so as you said, they can continue to operate but what hangs in the balance is their most important european market, and what is different this time around than 2017 when that license was initially revoked is that these are operational failures it's no longer about corporate governance they have apologized, tried to make things right, but the technology still isn't working for them the tfl cited 14,000 unauthorized and uninsured trips, and that is a big problem for uber. >> it certainly is does it change morningstar's view on the equity you guys have been bullish it's been a very difficult story for investors. this could be a gigantic blow for

. >>> morningstar out with a report explaining why it's become more difficult for u.s. active equity managers to outperform their benchmarks. what now, leslie >> sara, as you know, it's only gotten more difficult over time to pete tbeat the market. the question is whether it will ever get any easier. in the last two decades, fewer and fewer managers are beating the relevant benchmarks. the so-called success rate was one out of every six in 2018 that compares with nearly 50% in the early 2000s. so is this a structural phenomenon or cyclical can it ever be reversed? that new report says, no, it really can't morningstar points to research on greater competition with marginal investors leaving the field leaving behind a more skilled field of investors to scrap over every morse sel of excess return. as you can see, the chart shows the dispersion between different styles the best performing strategy compared with the worst performing as you can see it gets more crunched up over time, meaning that tilting outside of your focus, for example, a large cap manager picking up some

more in the fake meat category or other propotional activity to ramp things back up >> i chatted with morningstar before, you'll see a premium chicken offering from mcdonald's in the near-term they're looking at the fl flexatarian market one more thing, this is a short-term disruption, the reason he's pointing to is the mcdonald's technology pipeline they have made a lot of acquisitions particularly around the drive-through. around 70% of their sales in the u.s. come from the drive-through. he thinks it will pay off. >> 70% of the drive-through -- thank you very much. kate rogers. >>> let's get to courtney now, the surprise announcemt under armour today that kevin plank, its founder, is going to step down as ceo >> yeah, that's right, kelly so 2020 is going to be a new year with a new ceo for under armour as patrik fisk takes over that top as ceo founder kevin plank does intend to remain pretty involved. >> f and foremost, this is my decision to get to this decision, patrik and i complement each other so well. the ability for the business the last time we talked with you, the company is moving fr

you have joe man swesuetto, the founder of morningstar you've got great owners that have got a vision and a commitment to grow the sport and america are changing this is a league for a new america that is kprcapturing al the excitement of young people we have the youngest fan base in all of pro sports. we have the largest percentage, and the fact that we're building stadium in downtown environments we've got an exciting bunch of players that are scoring a bunch of goals and playing for national teams and all of that's leading to the success that we've had, certainly over the last number of years >> does it help that celebrities are getting in on the action in terms of ownership, john whether it be attracting the younger audience or helping the violations go higher >> you know, i think it does i mean, it shows that celebrities, as you know, many of the athletes that have invested in the league, magic johnson or james harden, the great nba player, you know, they've got a lot of places they can invest their money and they're looking at professional sports and they're looking at soccer as

what are investors looking for to keep the momentum going let's bring in the senior equity analyst at morningstar welcome and give me your top and bottom line numbers here >> well, we're looking for indications that top line growth will be pretty impressive. we're thinking these guys are going to grow at a 35% growth and then in terms of maus, monthly active users, we want to see growth in that the most important thing in our view is how they monetize the users. the average revenue per users, we hope will be around 25% growth year over year and we expect to continue over 20%. >> so pinterest had about 291 million active users at the end of the first quarter you're saying while you would like to see double digit growth there you would like to see 25%% growth and average revenue per user how are they going to achieve that >> a couple different ways one, they've already tapped into a very impressive growing market of course online digital advertising. the second thing is that they are planning to more aggressively expand into europe. if you look at the revenues, they're generating around 95% of the

gives us a little bit of comfort, is the fact that investor sentiment is relatively negative, you saw morningstar report that in the third quarter, something like $60 billion left equity, mutual funds and epf's, that is the highest since 2009 those type of outflows out of equities, don't happen near market peaks or right ahead of corrections. and i think the fact that sentiment has been negative really tells you that there's a lot of money on the sidelines and i think that there's still a lot of buying left to occur in the market over the next few months gentlemen, thanks, we'll leave it there for today >> coming up on the tasting menu, weworks lows, and shaq speaks on china. hi, my name is sam davis and i'm going to tell you about exciting plans available to anyone with medicare. many plans provide broad coverage and still may save you money on monthly premiums and prescription drugs. with original medicare, you're covered for hospital stays and doctor office visits, but you have to meet a deductible for each and then you're still responsible for 20% of the cost. next, let's look at a medicare s

morningstar suspended the rating of the fund which sent natixis shares sharply lower last week outflows reached 600 million euros in the second quarter but analysts estimate clients pulled 1.4 billion euros between tuesday and thursday last week. on monday h20 sold some of its bonds putting the aggravate value to less than 500 million euros. there's been a bunch of downgrades on natixis. barkley barclays calls the incident a black swan event interesting comments out of barclays, calling this a black swan event it's the third event in the fund management industry coming from such high profile names. we had the fund from natixis, the gam fund, the woodward fund. these funds were heavily invested in illiquid assets. is this just poor governance on the part of these funds? >> the issue is -- i was looking this morning at how many private equity funds have actually been evolved in the last 15 years it's grown 150 percent in the last 15 years. you have 3,500 private equity funds now. in the capital formation cycle the big money is not made when a company goes ipo'd, it's in the private equity

hi, kate >> hey, wilf it's all about the avocado morningstar says names like chipotle which closed down over 2% and panera which is of course now private may be pressured by this new round of tariffs. chipotle told cnbc overt last year our supply chain team has been working to diversify. our produce supply consistent with our food with integrity principles, if the announced tariffs are enacted they would negatively impact our costs and we are monitoring the situation and working with our suppliers to minimize the impact morningstar also called out smaller chains chuy's holdings and fiesta restaurant group, which may be less agile and able to diversify their supply chains if and when these tariffs of course come to fruition, guys back over to you >> kate, thank you mexico's a huge exporter of agricultural products to the u.s. aditi roy is here. lucky us with that angle. and it's not just avocados >> avocados are a big part of it as kate mentioned. but there's also a lot more. the u.s. brings in more agriculture products from mexico than from any other country. total u.s. agricultural imp

morningstar saying the trade negotiations are an overhang on the stock. he's blaming lower shipments between the u.s. and china competitor u.p.s. shares also feeling the pain down more than 4% since may 6th during its call after earnings april 25th, the ceo david adlai said the uncertain between the u.s. and china is softeninth recast for the region but long term the company sees big opportunities in china bye! ♪ hey dad! hello, betee! kaisi hain aap (how are you)? i'm good, how are you? good! so good to see you. it's late, where are you? i'm at work. oh gosh, so late. i know, but guess what? what? i've saved enough to come visit you. well, that's such great news! at u.s. bank, we believe that hard work works. and for everyone working toward a goal, we're here to help. >>> welcome back we showed you a big day on wall street really across the board tesla's going the other way today. that stock just off the lowest levels of the day and it's only about $5 above its 52-week low why are we showing you this? because -- forgive me for looking away at my comput

joining us to talk about this is damien conover, he's mornings r morningstar's equity analyst following the stock. give me your take on this news this morning that does have the stock down a good deal >> when you see the stock down this much, you always have an initial reaction, there must be something fundamentally wrong here but what i think is happening is this recall by j&j has stoked the fears over all the litigation that's outstanding on j&j right now related to the talcum powder. however, from our view, we haven't changed our fair value we think this is an overreaction by the market and a good opportunity for investors to get into the stock >> i mean, this company has legal expenses that dwarf pretty much any other companies, i would imagine, given not just talc, but opioids and other things, as well, as you well know, damien 15,000 plaintiffs alone here in terms of this charge that talc powder causes cancer, essentially. why aren't you, as an analyst, following the company concerned about the possibility that they could be facing significant losses in terms of at least versus th

would say that each before tyson did this they were an investor in beyond meat and each before that morningstar farms had this chicken nugget that was vegan product. i tried it and i could do it again. so the barriers to entry thing is huge, but the brand recognition will be key for a lot of these guy, but the moment up they can have. >> it goes to the taste test the only way beyond meat maintains it is it you, dom, tried the beyond meat burger said i will seek out that one and would that be true >> i don't know. i would say this i would say that the opposition i've run into a lot from covering these stories and not from the people who say it's plant based, it's about the people that say it's about the slaughtering of animals and the aversion to that that they're turning to plant-based proteins. >> half the point for a weight watchers day >> sue herera told us that where a traditional burger is 25, 20% and all carbohydrates. in a day and age when the keto diet is the rage, all of this is appeal >> you look at beyond meat and very successful and this is the right time for tyson to participate wi

joining us from morningstar, shading coverage on eight cannabis stocks. thank you for joining us. >> thank you for having me. >> there are so many glowing projections about what the total market could be. so far it's only penetrated this percent, 8%, 6% of the cannabis market what is the total projection built on how can we better understand that is there an assumption that every dollar in the illegal market will be converted to the legal market is that what the total adjustable market is >> yes, i think that's part of it you have to understand the black market is quite large already so for the growth in the market, the demand already exists. it's simply just converting it the legal market offers advantages that the black market doesn't. on top of that, i would also add that what we generally see in states that have legalized, there's a boost in consumption rates. consumers that would have never consumed cap any bus prior to legalization start trying it after it is legalized. you have some of that effect as well. >> is that the predominant experience that

you know i think that's a fair assessment at morningstar, we call that a fair value estimate. the problem we run into is we're an roic model, so, you know, i'm looking at what we're calling an economic mode. this is a newly listed company, so i'm not sure there is a giant moat here yet. there are definitely signs of positive momentum and strong adoption, the metrics while decelerating, we are generally good so to say i'm bearish is maybe a little misleading. i think i was probably among the highest estimates for the quarter, which we don't emphasize so much. it was a good quarter by them. i would say though that we do have a little concern that yeah microsoft is giving teams away for 43 that's tough sledding. so, for example, last night when the ceo was saying we're not as concerned about monetizing and converting our free users to pin users, i think that is a little stumble. i think investors don't necessarily want to hear that. if you are concerned about your 5,000 free users, microsoft is on 250 million desk tops, so that's a pretty big funnel you have to overcome. >> by th

. >> reporter: according to morningstar 48% of active u.s. stock funds beat passive indexes in the year through june that's up 37% year-over-year but passive vehicles are still becoming increasingly dominant passive is now taking over almost half of the stock market according to bank of america and that's caused hedge funds to build up the credit side of their business cio of sculptor said that's why they are growing droid be more than half of their $30 billion in asset management. >> on the credit side that's hard to replicate. within the world of opportunistic credit there's not an etf that can work a company through liquidation of assets. with credit we focus on what we do, hopefully we'll be able to have an edge in for a long time. >> reporter: sculptor is up 10% and seen inflows in to credit and outflow from their multi-strategy fund. >> how does this relate in terms of performance we started to see good enough performance to justify the flows? >> on the credit side of the business, absolutely and on the real estate business absolutely m

stocks rallying today but what's the post earnings playbook for stocks for that we're joined by morningstar stock fund manager of the last decade, david herro. chief investment officer of harris associates whose oak mark global funds has consistently beaten the benchmark and also includes today's stock in focus, alphabet, among its top three equity holdings. maybe let's start there and your take on alphabet and some of the concerns in the market today around those earnings. >> well, we really don't look at things quarter to quarter, you know, week to week, year to year we think alphabet is a great company. it continues to produce cash flow and this is what makes the company valuable it continues to modify its business plan. it does the thingsnecessary to build shareholder value. and as such, we think it is itself a good value. it's taken its very strong position in search and it's expanded that. it's become a dominant place to place advertising. so whether it's this quarter or next quarter, we think alphabet is doing what it takes to build shareholder value. and that's what makes us happy s

break down those numbers, our senior research analyst at susquehanna and david schwartz an analyst at morningstar. sam i'll turn to you gross margin is up 20 basis points to 44%. >> they did say there would be more margin pressure in the quarter slightly more than they anticipated. your first conversation about china sounds like china of better than people thought they were expecting a little bit of decel >> david here, they talk about average selling price increase as well as expansion but higher product cost due primarily to those north american tariffs does that surprise you did you work that through in your model? >> i think that's a very good number my number was at 44.1% 44.0 is close. i think they had some one time issues in the quarter including the tariffs and possibly the demonstrations in hong kong and other issues in china that may have had a small impact on the grors mar gross margin >> overall clearly everything is still going very right for this company. is there a question just to where the stock had got to and the valuation? is that why it's slipping? >> it's slipping a little bi

that's according to data from morningstar. that's the most in three years meantime, passive funds are growing in market share. those are up 2% from last year mike, the read through here? people are just looking for lower cost options >> and they have been for a while. so many structural reasons for it to continue i think it would probably take a major market break and a rethinking of exactly, you know, what you want your portfolio to do for you it has the benefit of transparency, of low cost. you have the financial services industry trying to gather assets and financial advisers trying to keep more of the lower fees for themselves, therefore lower costs, passive products are the way to do that so i think it's a very difficult -- it's a very difficult trend to fight, except by tbecoming more transparent in active strategy and maybe having competition, which is already happening. >> chris, i bet you've got a strong view on this. >> i do, very much so. we're 70% passive in the usa, 50% passive in non-u.s for us, we can operate th

. >> morningstar 2017 fund manager of the year tells us what she's watching in the global markets >> plus we'll head to the floor ad'sakonhe securities to get a trer te t sell-off. he'll trade the close just minutes before the bell rings. back after thi >>> welcome back our next guest says trade war tensions are actually creating opportunities in some cyclical stocks sarah keterror from causeway capital joins us with more on that some of these opportunities you're seeing, though, they're overseas, is that right? >> that's correct. measured as the isa index saw a 20-year valuation low versus the u.s. market. there are plenty of opportunities abroad >> and european banks top that list i guess we say this every time you come on. if you look at deutsche bank they have continued lower throughout the time you've called for this sector >> we didn't buy them all but there are some with very committed managements working tirelessly to streamline their businesses like unit credit in italy an come out of the banking system, and it will because there's no other way the banks could then lend and

for more let's bring in ali from morni morningstar and ed lee is it user growth that wall street is -- >> i think user growth clearly they stemmed the bleeding from a few quarters ago and are doing better and wanted to point out what julia was getting at discover platform is where they're shining because ultimately, you know, in order to generate the added ad dollars you need people to stick around and look at stuff beyond snapping photos and accepting to each other that's the key measure i think from what i'm seeing here, audience watching content has grown 35% year over year that's pretty significant. so once upon a time snap liked to call itself a camera company. it's a media company >> not during the ipo race. >> what's your take, ali >> i think they're impressive. the dau growth was certainly imblessive and, of course, as you can see by the reaction pretty surprising. that growth acceleration may not last long. their guidance is pretty impressive but the reason their growth may not accelerate that long, mainly it was driven by the android revamp so that's not going to continue an

starbucks locations are company owned while another brands' franchise which analysts from morningstar and btig say means that the coffee giant could feel more of an impact if preferences in china were to change due to these trade tensions starbucks of course is betting big on china, even calling the country its second home market executives have said in the past that the brand is well positioned to withstand ongoing developments due to its 20-year history operating there. domino and is papa john's all have a few hundred locations between them in china so there's less risk of an impact there back over to you >> kate, thank you increased tariffs on american liquefied natural gas could have a big mpact on energy stocks ylan mui with the details on that angle in washington ylan >> sara, president trump will be speaking at a new lng export terminal in louisiana any minute now, and there has just been a massive amount of investment in this sector. the terminal that trump is visiting cost $10 billion and created 6500 jobs. there's an estimated total of $50 billion in projects either planned

joining us now to talk about the proposed fiat chrysler and renault merger, richard hilger, morningstar analyst. thank you for joining us is this purely a defensive cost-cutting scale move or are there strategic reasons one company has that the other does not? >> i think it's a combination. by the way, thanks for having me today. the combination of the two would provide significant economies of scale especially in the small car area where profits are none or slim as well as fiat chrysler having been a laggard in electric vehicle production. this would give them some valuable technology from renault, which has been one of the leaders in producing electric vehicles. >> john, do you have any thoughts on the deal and how you would be playing it? >> i think it's a trend of high capital intensive cyclical industries merging we saw in the 2000s the rails merged the last ten years we've seen the airlines merge this could be the start of the autos starting to merge. and i take more of the side of it's two smaller players merging together to survive in a very changing cyclical auto landscape as m

>> at the big board, tidewater celebrating its merger to form the largest operator morningstar at the nasdaq, independent research and pitchbook, data provider to private and public equity markets. all right, jim, so, what's important to watch at the open, at least >> i think beyond meat, because beyond meat represents this era's -- it's this year's tesla, okay tesla being now morgan stanley again cutting numbers. what is their thing? like, it's -- i don't understand what they're saying in terms of cutting numbers and, therefore, still kind of liking tesla if we get a number -- if we get beyond meat doesn't blow away the numbers, i mean, it's a $13 billion company. i happen to personally like ethan brown very much, the ceo and i have had dinner with ethan brown, using beyond meat and the meat tastes like short rib, caramelized, incredible. the burgers are amazing. he has a case to be told and so, let's understand that this is a big food company that is not just millennial, it's pretty much everybody. if you cook it right, it's real good now, maybe youneed a professional chef to come t

. >> for more, let's bring in equity research analyst for morningstar and jerrod karcantoy eric, what's your take on this appointment? >> i think this is a home run for wells fargo. and honestly, we didn't expect them to pull something off of this magnitude we were advising investors, you know, you really have to be prepared for alan parker to keep the job with how long it's taking and issues around payouts, things like that. to get someone with this caliber, this kind of experience and reputation, i would say it's a home run for wells >> jerrod, do you degree >> i would it's a solid trouble. you know, charlie left jpmorgan unceremoniously, right after the financial crisis did a good job at visa never really got on track at bank of new york a solid hire, no doubt about it. to go with somebody from the outside of his caliber is positive rather than having to go with an interim ceo and make him permanent. but he's gotlift i ing to do, a lot of things that need to be done to get wells back on track. >> wells fargo has dealt with a series of scandals and lawsuits. perhaps it will take some

locations but likely not enough to feel a major impact on this news today according to analysts from morningstar and btig starbucks, though, also owns its locations in china whereas mcdonald's and others franchise their locations. analysts say the coffee giant o'could stand to feel the impact more if consumer sentiment shifts in china but we're not really there quite yet starbucks did have a 3% com np china. back to you. >> kate rogers winding down the trading session. right now we have less than five minutes to go. we'll have the closing countdown next >> but first let's head to bertha coombs for a check-in at the nasdaq see what's moving there. bertha >> we talked a lot about the large caps with apple today looking like it's going to have a 6% plunge but it's the small caps that are taking it on the chin as well the russell 2000 back in correction materiality, down nearly 12% from its high and it hasn't put in a new high this year like the other major indices. among the losers a lot of companies trying to expand in china like worldwide wolverine, it wanted to sell more merrill and they just --

slashing its dividend joining us on the "squawk" newsline is aaron lash consumer of equity research at morningstar. what's the most concerning to you? >> yeah. i think that, you know, if you look at the actual -- actually at the top line performance, we actually view that as a positive but you're absolutely right. that got overshadowed by a number of negative headlines surrounding the s.e.c. investigation as well as the dividend cut more troubling than anything else, the s.e.c. investigation in and of itself seems narrow in scope. the extent to which they're using the proceeds to reduce their leverage is a positive but obviously when combined, it's definitely a significant negative headline. >> let's just look at the base of the business. t just the idea they don't have the pricing power they've had in the past that consumer tastes are changing that they had been more than they had anticipated what do you make of that >> i think that that's very -- that's something that we've been saying that, you know, our expectation or our thinking had been that kraft heinz had been underinvesting behind their

according to data from morningstar, $60 billion pulled out of stock funds in the third quarter. highest number since 2009. separately, california utility pg&e had turned down an offer from san francisco to buy the power lines and other infrastructure within the city the $2.5 billion offer under values its assets. the company is working its way out of bankruptcy after being held like for california wildfires in 2017 and '18. >>> lyft and uber have filed suit against new york city, right here, over new cruising rules for drivers. new york is limiting the time how long they can drive in manhattan without passengers the company said the rule does not effectively affect congestion and hurts drivers and riders. >>> boeing stripping the chairman title from ceo chairman dennis mullenberg. what does this mean? >> it means that dennis mullenberg will focus on the day-to-day operations of the company. there is a new non-executive chairman of the company. for dennis muilenburg, it means all of his attention -- the board has sent a very clear message. you focus on the day-to-day operations s