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)

AgFeed Industries

$13.20

****

Diebold (NYSE:DBD)

$37.45

**

Finish Line

$5.84

**

Rambus (NASDAQ:RMBS)

$24.49

**

I-trax Inc.

$5.35

**

Sources: Motley Fool CAPS, Yahoo! Finance.

Chinese animal feed supplier AgFeed has no discernable fund fans here in the U.S., as reported by Morningstar. But Inside Value pick Diebold, frequently found on the front pages for its controversial electronic voting machines, has plenty. One of its top buyers gets the five-star treatment from Morningstar.

Introducing the American Funds Growth Fund of America (AGTHX), one of the world's largest ($181.9 billion in assets) and most successful (up more than five percentage points per year on the S&P 500, and 11 on category peers, over the past decade) mutual funds in the history of the business. So good is the team behind Growth Fund of America that it's hard to criticize it for demanding a 5.75% front-end load, or sales charge.

Here's a look at the top five domestic stocks these geniuses own today:

Company

Last closing price

CAPS rating (out of 5)

Google (NASDAQ:GOOG)

$455.12

***

Microsoft (NASDAQ:MSFT)

$29.00

***

Oracle (NASDAQ:ORCL)

$20.68

****

Schlumberger (NYSE:SLB)

$91.30

*****

Cisco (NASDAQ:CSCO)

$24.23

****

Sources: Morningstar, Motley Fool CAPS.

Obviously, the team likes tech. As do I. But of all the tech titans in this list, I'm most interested in Oracle, a stock I own and whose sell-off I celebrated last week. Here's an excerpt for those who missed my take:

[W]e do know that Oracle is aiming for 20% earnings growth on an ongoing basis. [Free cash flow] has grown at least that fast historically and, if [CEO Larry] Ellison is right, will continue to. So, let's say 20 is a fair multiple. Back to the calculator. Oracle has produced $1.34 in free cash flow per share over the trailing 12 months. Multiplying that by 20 equals $26.80, or what I'd call fair value. Even with yesterday's "miss."

I'm not the only one who thinks so. CAPS investor resca wrote this in October:

Oracle has been fairly flat since 2000. It grew about 18% in 2006, and in 2007 had large growth in 3rd Qtr. Companies upgrade to new Versions about every 5 to 6 yrs. It looks like Oracle is starting to increase in value again. Don't expect growth and stock splits like in the 90's, but the stock may be $24 to $25 [a share] by end of year, and will probably increase in value about 15% next yr.

Those estimates are slightly more aggressive than my own, but on balance, I agree. I suspect the team at Growth Fund of America does, too.

But I'm even more interested in what you think. Would you own Oracle, or any of the stocks in Growth Fund of America'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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