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)

Millicom International

$109.55

****

Suntech Power

$61.45

****

Aeropostale

$25.75

***

Answerthink

 $4.24

*

Genitope

$4.42

*

Sources: Motley Fool CAPS, Yahoo! Finance.

Cellular contender Millicom has plenty of fund fans, two of which are highly rated by Morningstar. Allow me to introduce you:

  • Van Kampen International Growth I (VIFIX), a no-load institutional fund that demands a $1 million minimum investment. Too bad for individual investors. Even though its 96 R-squared rating suggests management is getting a lift from its best-fit index in producing returns, the fund has beaten its benchmark -- the MSCI EAFE -- by nearly 2% annually over the past decade. Nice.
  • Leuthold Core Investment (LCORX), a Motley Fool Champion Funds pick that's still run by superstar stock picker Steve Leuthold. The bad news? The fund is closed to new money. Envy the Fools who slipped in before they locked the doors. Leuthold charges just 1.08% in annual expenses, yet has pounded both the benchmark Dow Jones Moderate Index and the S&P 500 over the last three- and five-year periods.

Of these two, the Champ -- Leuthold Core Investment -- interests me most. Here are its top five stock positions:

Company

Last closing price

CAPS rating
(out of 5)

Freeport-McMoRan (NYSE:FCX)

$90.06

*****

Diamond Offshore Drilling (NYSE:DO)

$112.55

*****

Teva Pharmaceutical (NASDAQ:TEVA)

$43.70

*****

Noble (NYSE:NE)

$49.51

*****

Pride International (NYSE:PDE)

$32.78

*****

Sources: Morningstar, Motley Fool CAPS.

Not surprisingly, this strikes me as an outstanding portfolio. But I'm most intrigued by deep-water oil driller Diamond Offshore, which is a new position for Leuthold, and a five-star winner for many of our very best CAPS investors, including camistocks and TheGarcipian.

Like Leuthold, Foolish colleague David Lee Smith sees more growth ahead for Diamond, and peer Transocean (NYSE: RIG  ) . Quoting his most recent take:

Diamond is now a "floater company," meaning that its bread and butter is its intermediate semisubmersibles and high-specification floaters that can drill in far deeper water. Some of those rigs are employed in the Gulf of Mexico, but an increasing number have been put to work on term bases in places like Africa, the Middle East, and South America. The increasing percentage of term work makes Diamond's earnings far less volatile than in the former "well-to-well" days, but the market has been slow to recognize that change.

Energy isn't my area of expertise, so I'll have to take David at his word when it comes to the business. The numbers, however, need little explanation. Diamond sports a miniscule 0.77 PEG ratio -- well under the industry average of 1.03. (For the record, fellow Leuthold holding Noble is even cheaper, at 0.52.)

I can't see how that's fair. Nor, apparently, can Leuthold. He's betting millions in shareholder capital on being right.

For me, it often helps to see what superior stock pickers are buying. If that describes you, too, then consider the Motley Fool Champion Funds newsletter. As I write, its collection of market beaters is up 12 percentage points on the S&P 500. Check out the entire portfolio with a free no-risk trial.


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