Morningstar is tumbling after The Wall Street Journal slapped the Chicago, Illinois-based mutual fund rating company with a bad rating of its own.
'MORN' was trading down 4 percent Wednesday for its biggest drop in two years following a 4,000-word article in the Journal that raised serious questions about the effectiveness of Morningstar's coveted rating system.
The Journal tested Morningstar's rating system by examining the performance of thousands of funds that the company reviewed over nearly 15 years. They found that funds the company rated highly failed to deliver.
While the Journal found that most five-star funds outperformed, "on the average, five-star funds eventually turn into merely ordinary performers." Only 12 percent of funds given five stars did well enough to earn the same rating over the next five years.
"Billions of investor dollars hang in the balance," they wrote.
Morningstar did not respond to a request for comment from CNBC.
The company told the Journal that the "star rating works well when it's used as intended: as a first-stage screen that helps identify lower-cost, lower-risk funds with good long-term performance."
"It is not meant to be used in isolation or as a predictive measure," Morningstar said. "Reversion to the mean is a powerful force that can affect any investment vehicle."
Morningstar has been performing well this year. Even accounting for Wednesday's decline, the company's stock is up almost 20 percent over the past 12 months.