Invest Like a Pro: Grantham Mayo Van Otterloo

Imitation is the sincerest form of flattery, right? Well, when you're learning a new skill, imitation can also be a great way to hone your craft.

If you're learning guitar, you might pick up a book of Jimi Hendrix's licks or download the chords to a couple of Bob Dylan's songs. So when you're trying to become a better investor, it only makes sense to take a peek at what the professional investors are up to.

For Fools who don't have the time or inclination to pick individual stocks on their own, Shannon Zimmerman at the Fool's Champion Funds newsletter has put together a buffet of mutual funds that have collectively outperformed their benchmarks by more than 13%. For the rest of us, we can tune in directly to what some of the major funds are holding.

You see, the SEC requires institutional investment managers who manage $100 million or more to show their cards via quarterly 13-F filings. This week, I've dug in to pull up some of the moves that big-time investment manager Grantham Mayo Van Otterloo -- also known as GMO -- has been making. And, to make things even more interesting, I cross-referenced its stocks against the opinions of the Fool's CAPS community.

Below are three stocks that GMO bought more of between its March filing and its June filing ...

Stock

Percentage Change in GMO Position

Current Market Value of GMO Position

CAPS Rating (out of 5)

International Business Machines (NYSE:IBM)

123%

$703 million

***

Chevron (NYSE:CVX)

74%

$735 million

*****

Intel (NASDAQ:INTC)

21%

$155 million

****

Sources: Capital IQ, Yahoo! Finance, and CAPS as of Sept. 10.

... and three on which it lightened its position.

Stock

Percentage Change in GMO Position

Current Market Value of GMO Position

CAPS Rating

JPMorgan (NYSE:JPM)

(85%)

$14 million

**

Akamai Technologies (NASDAQ:AKAM)

(76%)

$9 million

****

International Game Technology (NYSE:IGT)

(99%)

$1 million

*****

Sources: Capital IQ, Yahoo! Finance, and CAPS as of Sept. 10.

Now, before you jump to it and make any hasty moves, remember that we're looking at what GMO has done in retrospect. For all we know, since the last 13-F filing, the firm has drastically changed its holdings in any or all of the above stocks. With that in mind, here are some further thoughts to kick off your research.

Know the boss
To really understand GMO, it's helpful to know a little more about the "G" in its name -- the outspoken Jeremy Grantham. Like many fund managers, Grantham puts together a periodic letter to GMO clients (and anyone else who's interested; you can register for free on GMO's website) outlining his view of the market and how he plans to approach the situation.

In recent years, Grantham has been famously bearish on many different asset classes -- in fact, he admits in his most recent letter that at times he was "too bearish." But if he was bearish before, now he's doubly bearish, as he thinks that assets of all ilks have run too far. In his most recent letter, he goes so far as to say that, as a result of our "overstretched, overleveraged financial system," he thinks that within five years "at least one major 'bank' (broadly defined) will have failed and that up to half the hedge funds and a substantial percentage of the private equity firms in existence today will have simply ceased to exist."

A pretty bold prediction, no?

Overall, Grantham sees a major market shift away from risk (or as he puts it, a shift toward "anti-risk"). So, then, it might not be much of a surprise to see his firm loading up on relatively large and conservative names like IBM and Chevron, while cutting back on riskier plays like Akamai and IGT. Though you might peg JPMorgan as a lower-risk stock, in Grantham's view of the world, it lies in the crosshairs of the coming shift thanks to the turmoil in the debt markets.

Though CAPS players are lukewarm on IBM and Intel, they are fully behind Chevron -- 1,061 CAPS players think the stock will outperform, versus just 45 who think the opposite. CAPS players are very bullish about the price of oil and its staying power as a badly needed resource around the world. CAPS player paulpharmd2000 gave Chevron a thumbs-up back in July and said that the stock was "still cheap and worth investing in because of the tremendous earnings potential going forward."

So is Grantham right that we should all be moving our money to safer places? Or will risk continue to trump anti-risk for a while? Hop on over to CAPS and start interacting with the other 65,000-plus CAPS players. While you're weighing in on these companies, you can also find out more about the 5,000 other currently rated stocks.

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