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)

Patriot Coal

$108.13

****

Cano Petroleum (AMEX: CFW  )

$8.00

****

ATP Oil & Gas

$42.65

****

Ultrapetrol (Bahamas)

$15.23

****

Pacific Ethanol (Nasdaq: PEIX  )

$3.54

*

Sources: Motley Fool CAPS, Yahoo! Finance.

Morningstar doesn't show any fund fans for miner Patriot Coal, but Cano Petroleum is feeling the love from some of my favorites, including superstar stock picker Chuck Royce and his Pennsylvania Mutual (PENNX) fund.

But today, I'm smitten with another highly-rated fund: U.S. Global Investors Global Resources (PSPFX). Lead manager Frank Holmes, with a 45% five-year average annual return, has vastly outperformed peers and the fund's best-fit index over the past five years. Few stock pickers not named Lynch, Buffett, or Heebner have ever produced such sustained returns.

Even better: Global Investors has no load and features a very reasonable 0.94% expense ratio. Here's a look at the top five stocks Holmes and his team own today:

Company

Last closing price

CAPS rating (out of 5)

McDermott International (NYSE: MDR  )

$62.03

*****

Occidental Petroleum (NYSE: OXY  )

$91.93

*****

Petrobras (NYSE: PBR  )

$70.50

*****

Potash (NYSE: POT  )

$199.07

****

Marathon Oil (NYSE: MRO  )

$51.39

*****

Sources: Morningstar, Motley Fool CAPS.

There are some excellent choices here. Brazilian energy giant Petrobras still looks attractive, for example. And Occidental Petroleum turned in a terrific quarter and raised production, which means there's probably more than economic tailwinds fueling growth.

My favorite, though, is Potash Corp. Let's turn to Foolish energy expert Toby Shute to explain the thesis. Quoting from his April take on the company:

Inventory issues are key to the bigger picture here. North American potash inventories, for example, were 37% below their five-year average at quarter's end. Think about how strong our natural gas prices are today, even with storage right around its average. No wonder Potash was so miffed when people pooh-poohed the stock price back in January. That share repurchase is looking pretty prescient.

Color me unsurprised. Agricultural stocks aren't my expertise, but I know how to spot management that excels at capital allocation. Potash's top brass has earned double-digit returns on invested capital every year from 2005 through today.

But is the stock cheap? Not at 44 times trailing earnings, alas. Nevertheless, the growth story here is compelling, as CAPS All-Star InvestorDeb explained in March:

I am a believer in the growing population will be consuming more protein as they raise their standard of living. More protein ala increased consumption of beef and chicken translates into more grain. Animals consume more grain that people. Increasing yield out of the same amount of land requires some help via fertilizer and seed technology.

I agree, but I'm even more interested in what you think. Would you own Potash Corp., or any of the stocks in the U.S. Global Investors Global Resources fund, at today's prices? Log into CAPS today and let us know what you think. It's 100% free to participate.

If you like seeing what superior stock pickers are buying, consider Motley Fool Champion Funds, which features the Pennsylvania Mutual fund among its recommendations. Its collection of market beaters is up 22% on their respective benchmarks as of this writing. Examine the entire portfolio with a free, no-risk trial.

Fool contributor Tim Beyers, who is ranked 17,665 out of more than 107,000 participants in CAPS, didn't own shares in any of the companies mentioned in this article at the time of publication. Find Tim's portfolio and his latest blog commentary. Petrobras is an Income Investor recommendation.The Fool's disclosure policy has recurring fantasies about a desert island, margaritas, and a plate of burritos. Go figure.


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