The Stocks the Funds Are Buying

We all know which stocks have made Wall Street's Buy List. But I want to know 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)

Mosaic

$90.71

*****

MGI Pharma

$40.25

***

LDK Solar

$47.85

***

Solarfun

$25.43

***

BlueLinx Holdings

$4.31

*

Sources: Motley Fool CAPS, Yahoo! Finance.

Agribusiness Mosaic has plenty of fund fans, several of which are highly rated by Morningstar. I'm particularly fond of two, however:

  • CGM Focus (CGMFX), a Champion Funds pick whose manager, Ken Heebner, has been producing market-beating returns for 10 years. The last seven of those years have been particularly productive, and CGM Focus has been the top fund in its category in four of those past seven years. And, yes, I'm including 2007.

    Here's how good Heebner is: While most excellent managers produce (at most) two to three points of alpha versus their best-fit index, Heebner earns more than twice that. (Alpha measures the amount of fund outperformance that can be attributed to stock-picking skill.)
  • Artisan Mid Cap Fund (ARTMX), a closed, no-load market-beater that's related to Champion Funds recommendation Artisan International Value (ARTKX). Interestingly, Mid Cap has been the better performer of the two. Managers Andrew Stephens and James Hamel have been on the job 10 years and, in that time, have produced returns in the top 2% of their Morningstar category.

Stephens and Hamel are definitely great investors, but Heebner is a Hall of Famer. I've got to see what he's buying. Presenting the top five stocks held by CGM Focus:

Company

Last closing price

CAPS rating (out of 5)

Vale (NYSE:RIO)

$32.46

*****

CNOOC (NYSE:CEO)

$157.53

*****

Vimpel-Communications (NYSE:VIP)

$39.38

*****

Countrywide Financial (NYSE:CFC)

$8.77

*

Potash (NYSE:POT)

$132.80

*****

Sources: Morningstar, Motley Fool CAPS.

This strikes me as a very strong portfolio. Take Brazil's Vale, which is the world's largest iron ore producer, followed by BHP Billiton (NYSE: BHP  ) and then Rio Tinto (NYSE: RTP  ) .

Interestingly, Vale is the cheapest of three on the basis of projected earnings:

Company

2008 Projected P/E

Vale

10.64

BHP Billiton

11.26

Rio Tinto

14.60

Source: Capital IQ, a division of Standard & Poor's.

Growth, meanwhile, is abundant in other minerals. Nickel, for example. CAPS All-Star bsamim explained it this way in March:

[Vale] just never ceases to amaze me, they are the largest producer of nickel ... as aluminum in planes increase so does the need for nickel ... why not go with the largest producer ... In addition, isn't it nice at this time to go with a company that is not levered to the U.S. economy?

Our Fool's pick has nearly doubled since. Yet global demand for commodities remains nowhere near satisfied. Vale joins my CAPS watch list today.

But that's me. What's your take? Would you own any of the stocks in CGM Focus's portfolio at today's prices? Log into CAPS today and let us know what you think. It's 100% free to participate. 


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