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)

Bright Horizons Family Solutions

$43.89

***

Helicos BioSciences

$12.65

**

Idenix Pharmaceuticals

$5.08

**

GeoGlobal Resources

$3.95

*

Dot Hill Systems

$3.48

**

Sources: Motley Fool CAPS, Yahoo! Finance.

Child-care specialist Bright Horizons has many fund fans, two of which get five stars from Morningstar. Allow me to introduce you:

  • Rainier Small/Mid-Cap Equity (RIMSX), a former guest in this column and whose manager, Jim Margard, emphasizes companies with strong balance sheets that are poised to benefit from current macroeconomic trends. It's an approach that has served him and his investors well -- Rainier Small/Mid-Cap's outsized returns over the past five years rank in the top 3% in its Morningstar category.
  • Winslow Green Growth (WGGFX), a tiny no-load fund that commands a not-insignificant $5,000 minimum investment. But its returns are worth paying for. Winslow has produced five straight years of double-digit gains, including a breathtaking 91.7% return in 2003.

Still, I'm most intrigued by Margard's long-term track record. Presenting the top five stocks held by Rainier Small/Mid-Cap Equity:

Company

Last Closing Price

CAPS Rating (out of 5)

McDermott International (NYSE:MDR)

$46.20

*****

Precision Castparts (NYSE:PCP)

$106.62

*****

Noble (NYSE:NE)

$44.82

*****

Sotheby's (NYSE:BID)

$29.92

****

General Cable (NYSE:BGC)

$55.48

*****

Sources: Morningstar, Motley Fool CAPS.

This strikes me as a strong portfolio. And not just because five-star stocks tend to outperform the broader market. What I like is how cheap these stocks are relative to their growth prospects.

Witness General Cable, which produces copper wire and fiber-optic cabling and has a 0.71 PEG ratio. Thank hot markets abroad for the outsized growth, wrote All-Star FOOLBEFREE in December. Quoting:

Growth of cities in India, China, Brazil and other emerging countries will demand more electricity wires and fiber optic cables for several years. U.S. and Europe will start heavily investing in electrical wires in the next few years. Worldwide expansion of Internet broadband will also increase demand for fiber optic cables.

That foreign exposure, when coupled with macroeconomic factors, should lead the stock higher, wrote CAPS player thethrash two weeks ago:

Over 25% of this company's business is overseas. The U.S. dollar's worth keeps decreasing in relation to many foreign currencies. Therefore, this company can cash in on the devalued U.S. dollar.

But that's just two Fools' opinions. What's yours? Would you own General Cable or any of the stocks in Rainier Small/Mid-Cap Equity'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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