The Stocks the Funds Are Buying

We all know who's on Wall Street's Wish List. But I want to know -- and I'm guessing you do, too -- who's doing the wishing. Which funds are buying the week's top stocks in our Motley Fool CAPS investor-intelligence database?

Here's our latest group of contenders:

Company

Currently Fetching

CAPS rating

Telular

$5.35

*****

Sigma Designs

$34.83

****

Oilsands Quest

$4.98

****

Cambridge Display

$11.59

***

Echelon

$31.95

***

Sources: Motley Fool CAPS, Yahoo! Finance

List-topper Telular, a telecom equipment supplier, has few fund fans. But second-seeded Sigma Designs, a semiconductor specialist, sports an impressive following, including:

  • Olstein All Cap Value C (OFALX), an expensive fund -- including a rich 2.19% expense ratio and a 1% back-end load -- that hasn't significantly beaten the market since 2003.
  • RS Emerging Growth A (RSEGX), another expensive fund. However, its team has delivered in the long run, beating the S&P by more than three percentage points annually over the past decade.
  • Hartford SmallCap Growth HLS IA (HISCX), which charges just 0.62% annually, but has delivered market-beating performance over both the last three- and five-year periods.
  • Russell Special Growth S (RSPSX), which sports a market-thumping 3.36% dividend yield and a history of market-beating performance.
  • Pacific Capital Small Cap Y (PSCYX), which has beaten the index for seven years running, frequently by a wide margin. It largest victory, a 37-point drubbing, came in 2001. This year hasn't been as promising. Manager Mark Stuckelman trails the S&P 500 by almost five percentage points.

Of these funds, Pacific Capital Small Cap interests me most. Here are its top five stock positions:

Company

Currently Fetching

CAPS rating

DSW (NYSE:DSW)

$34.25

****

Headwaters (NYSE:HW)

$14.80

****

Brocade Communications (NASDAQ:BRCD)

$6.36

****

MicroStrategy (NASDAQ:MSTR)

$64.48

**

Wolverine World Wide (NYSE:WWW)

$25.20

***

Sources: Morningstar, Motley Fool CAPS

This strikes me as an interesting, if somewhat speculative, portfolio. Consider Headwaters. While this coal-crunching Rule Breakers pick has fallen from glory, I wonder whether pricing each dollar of its revenue at $0.55 is too steep a penalty.

CAPS investor digdug62 appears to agree. Quoting from his pitch:

Stock has suffered recently with weakness in construction and expiring alternative energy tax credits. However, synthetic oil from coal and clean coal combustion technologies will be hugely important in the not-too-distant future and HW could be one of the winners. Taking a long-term view, recent stock weakness makes [Headwaters] an even more compelling value and growth play.

That's exactly the type of situation that appeals to bargain-hunter Stuckelman, a managing director and lead portfolio manager for highly regarded Nicholas-Applegate management. You might remember that its Micro Cap fund has made -- count 'em -- three appearances in this column.

For me, it often helps to see what superior stock pickers are buying. If that describes you, too, consider Champion Funds. Shannon Zimmerman's picks are up 14% on their respective benchmarks as I write. Check out the entire portfolio with a free, no-risk trial.

That's all for now. See you back here next week, when we once again look at the funds behind the fantasy.

Still hungry for stock ideas? Stop by CAPS and get your fill, 100% free.

Headwaters is a Motley Fool Rule Breakers pick.

Fool contributor Tim Beyers, ranked 8,129 out of more than 60,000 participants in CAPS, didn't own shares in any of the companies mentioned in this article at the time of publication. Find Tim's portfolio here and his latest blog commentary here. The Motley Fool's disclosure policy has recurring fantasies about a desert island, margaritas, and a plate of burritos. Go figure.


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