The Stocks the Funds Are Buying

We all know which stocks have made Wall Street's Buy List. What I want to know -- and I'm guessing you do too -- is, who's doing the buying? Which funds are buying Wall Street's most popular stocks? And how does their judgment compare with that of our Motley Fool CAPS community?

Here's our latest group of contenders:

Company

Last closing price

CAPS rating (out of 5)

IMAX

$5.83

****

Syntax-Brillian

$2.77

**

DayStar Technologies

$5.70

**

China Technology

$7.16

*

La-Z-Boy

$7.21

*

Sources: Motley Fool CAPS, Yahoo! Finance.

HD-TV upstart Syntax-Brillian, a stock I've not been fond of, has two fund fans that are highly rated by Morningstar. Allow me to introduce you:

  • Ivy Science & Technology C (WSTCX), whose manager, Zachary Shafran, has produced a 16.3% average return since 2003, vastly outperforming both the S&P 500 and his category peers -- including a 17-point drubbing of the market in 2007. It's almost enough to convince me that the fund's 2.33% expense ratio for its C shares is worthwhile.
  • Laudus Rosenberg U.S. Discovery Instl (RDISX), which hasn't performed as well as Ivy Science but has the advantage of being a no-load fund. The bigger problem with Laudus Rosenberg is that, while it had a huge (41.4%!) return in 2003, performance has been trending down since then.

So, let's dig into Shafran's picks. Presenting the top five stocks held by Ivy Science & Technology:

Company

Last closing price

CAPS rating (out of 5)

Research In Motion (NASDAQ:RIMM)

$93.70

**

Cerner (NASDAQ:CERN)

$57.71

*****

Alliance Data Systems (NYSE:ADS)

$68.25

**

Noble Energy (NYSE:NBL)

$79.66

*****

Cree (NASDAQ:CREE)

$24.82

****

Sources: Morningstar, Motley Fool CAPS.

This strikes me as a strong portfolio. Consider smartphone maker  Research In Motion. Although only a two-star stock in CAPS, RIM has done what neither Palm (Nasdaq: PALM  ) nor Nokia (NYSE: NOK  ) could -- stiff arm the iPhone.

Seriously. Third-quarter revenue was up 22%. Operating margin improved two percentage points. And free cash flow more than doubled.

Yet, if Wall Street is even within spitting distance of being correct, the stock is still priced reasonably. Based on analyst expectations, RIM trades at 30 times this year's earnings and 22 times 2009 income. Long-term projections, meanwhile, call for RIM to boost its bottom line by 37% a year over the next five. Not bad, eh? Not to me.

But that's my take. What's yours? Would you buy Research In Motion or any of the stocks in Ivy Science & Technology's portfolio at today's prices? Log in to Motley Fool CAPS today and let us know what you think. It's 100% free to participate.


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