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)

AmCOMP

$12.06

****

Washington Mutual

$21.82

**

Retail Ventures

$7.10

**

Matria Healthcare

$30.64

**

Amrep

$45.37

*

Sources: Motley Fool CAPS, Yahoo! Finance.

Only two funds are following workers'-comp-insurance specialist AmCOMP, and neither is highly rated.

Not so for WaMu, which has many fund fans. Two of them get five stars from Morningstar: Franklin Income A (FKINX) and Excelsior Value & Restructuring (UMBIX). Yet neither is more interesting to me than a two-star performer that's been buying shares of the beleaguered bank.

Allow me to introduce you to Oakmark I (OAKMX), a Champion Funds pick that Bill Nygren and Kevin Grant have efficiently run for years. But the last few of those years haven't been kind. Since 2003, Nygren's and Grant's picks have trailed both the S&P and category peers. However, the beaten-down stocks they favor have staged a rally during Mr. Market's 2008 tantrum; Oakmark is up nearly four percentage points on the broader market year to date, and outpacing category peers by even more than that.

How did it happen? Let's look at the top five stocks held by Oakmark I:

Company

Last closing price

CAPS rating (out of 5)

Yum! Brands (NYSE:YUM)

$35.24

****

Viacom B (NYSE:VIA-B)

$39.66

**

Best Buy (NYSE:BBY)

$48.47

***

Intel (NASDAQ:INTC)

$21.77

****

Texas Instruments (NYSE:TXN)

$31.52

****

Sources: Morningstar, Motley Fool CAPS.

This strikes me as a pretty strong portfolio. Even with Intel's suspiciously coy guidance, for example, the chip maker's growth easily outpaced that of rival Advanced Micro Devices (NYSE: AMD  ) in the latest quarter.

CAPS investors are betting that will continue. Of the 44 who've rated Intel since Friday, only two believe the stock will underperform.

AMD has its own fans, of course, but many are placing faith in the firm's cash-burning ATI unit. Here's how CAPS investor chrismichael1 put it in a November pitch:

[T]he ATI acquisition will begin to reap rewards in the next four quarters and beyond. AMD took it on the chin immediately following the buyout because they paid too much for ATI and were engaged in a price war with Intel. The combination was too much and hammered their financials. Then you have the rollout of their Phenom series of microprocessors. AMD has always had a technical advantage over Intel until just recently, and Phenom stands to smoke Intel's quad-cores for a lower price.... Outperform!

Perhaps, but I'll side with Nygren and Grant on this one. Intel's role as the standard-bearer in chips for wireless networking creates a moat I don't believe AMD will soon cross.

But that's my take. What's yours? Would you own Intel, or any of the stocks in Oakmark I'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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