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)

Hecla Mining

$11.15

****

TXCO Resources

$12.83

****

DXP Enterprises

$45.81

****

CF Industries

$84.89

****

Winn-Dixie Stores

$18.43

*

Sources: Motley Fool CAPS, Yahoo! Finance.

Silver miner Hecla has plenty of fund fans, two of which earn four stars each from Morningstar. Allow me to introduce you:

  • USAA Cornerstone Strategy (USCRX) is a medium-sized, no-load fund that vastly trails the performance of its best-fit index and whose managers, if you believe its 95 R-squared rating, don't add enough value for the fees investors pay.
  • TFS Market Neutral (TFSMX) is a former guest in this column and, from what I can tell, a good long-short fund. Consider its alpha, which calls out the amount of its return that's attributable to management expertise rather than market whims. Although TFS underperforms its best fit index by 0.27% on that basis, it beats most peers, including ICON Long Short (IOLIX), whose return trails the benchmark by a staggering 6.15%. That said, I wouldn't open a position till TFS management cuts Market Neutral's outrageous 2.48% expense ratio by at least 50%.

Yet I can't contain my curiosity. Here's a look at Market Neutral's top five stock positions:

Company

Last Closing Price

CAPS Rating
(out of 5)

T-3 Energy Services (NASDAQ:TTES)

$47.60

*****

Universal Insurance (AMEX:UVE)

$7.65

****

Moldflow (NASDAQ:MFLO)

$16.94

****

First Consulting Group (NASDAQ:FCGI)

$12.73

*****

eHealth (NASDAQ:EHTH)

$35.99

****

Sources: Morningstar, Motley Fool CAPS.

Several stocks here are interesting -- potential rocket stock eHealth, for example. Health insurance is a huge problem for self-employed individuals like me. And there are plenty of us: 10.6 million in the U.S., according to the Census Bureau.

Now, couple that with the impending retirement of millions of Baby Boomers, many of whom may not be able to keep medical benefits as the result of corporate cutbacks. Can anyone really be surprised that eHealth and larger peers such as Aon (NYSE: AOC  ) are trading near 52-week highs?

Few Fools are. And, for some, it doesn't matter. Here's how CAPS investor pnouri pitched the stock last month:

This is the primary company that offers private health insurance comparisons on the Internet. Before other companies realized this was a growth industry, [eHealth] gained significant market share and is the leader. I would like to wait until after earnings to load up on it, but long term, don't worry about the multiple. I think $45 is reasonable inside of [two] years and upwards of $100 in [five] years.

I'd agree, and I'll add that it's a good bet that the economic worrywarts at TFS view insurance and health care as a hedge against the volatility that otherwise follows a manic Mr. Market.

For me, it often helps to see what superior stock pickers are buying. If that describes you, too, then consider Motley Fool Champion Funds. Its collection of market beaters is up 14% on their respective benchmarks as I write. Check out the entire portfolio with a free, no-risk trial.


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