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)

VSE (Nasdaq: VSEC  )

$40.15

*****

JetBlue

$5.68

**

East West Bancorp

$13.96

*

UCBH Holdings (Nasdaq: UCBH  )

$4.75

*

GeoGlobal Resources

$3.64

*

Source: Motley Fool CAPS.

Contractor VSE has a number of fund fans, none of which gets five stars from ratings agency Morningstar. No matter. The top recent buyer of this stock is a three-star fund that I like very much. Allow me to introduce you.

Bridgeway Small-Cap Growth (BRSGX), with less than 3% trailing-three-year returns as a result of a poor 2008, hasn't been as fortunate as its sisters, three of which are no-load market beaters that you'll find in our Motley Fool Champion Funds portfolio. If I see better returns ahead for this fund, it's because of the manager who runs Small Cap-Growth and its winning sisters: John Montgomery.

Montgomery is a quantitative investor. That means he uses numbers -- and numbers alone -- to pick stocks. With Small-Cap Growth, Bridgeway's model selects fast movers worth $5.5 billion or less. (The median market cap for fund holdings was just $559 million as of Sept. 30.)

What does the math say now? Here's a look at the top five stocks Montgomery and his team are holding as of this writing:

Company

Last Closing Price

CAPS Rating (Out of 5)

Dril-Quip (NYSE: DRQ  )

$51.81

****

Guess? (NYSE: GES  )

$35.83

**

Deckers Outdoor (Nasdaq: DECK  )

$121.61

**

Fresh Del Monte Produce

$24.67

**

CommScope (NYSE: CTV  )

$45.93

****

Sources: Morningstar, Motley Fool CAPS. U.S.-traded only.

Retailer Guess? is my favorite among this list. It's rare to see a company that's on track to grow by more than 21% a year trading for less than 20 times earnings. Yet with a price-to-earnings of just less than 18, that's what we have here. Crazy.

Crazier still: Over the past year, Guess? has produced a startling 30.7% return on its invested capital, well above the returns from peers bebe (Nasdaq: BEBE  ) and Wet Seal -- 11.1% and 12.1%, respectively.

"[Guess?] has international appeal. Their products recognized worldwide," wrote CAPS investor capology in June. "[N]ow with new stores expanding into [China] and [Europe] earnings are sure to grow! This stock was a steal at $41 [and] I can see it going into the $70's."

I, too, thought it was a steal in the $40s and still consider Guess? to be a growth-stock bargain. But I'm more interested in what you think. Would you own Guess?, or any of the stocks in the Bridgeway Small-Cap Growth 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. Its collection of market beaters is up 17 percentage points 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 18,034 out of more than 115,000 participants in CAPS, didn't own shares in any of the stocks mentioned in this article at the time of publication. The Fool's disclosure policy has recurring fantasies about a desert island, margaritas, and a plate of burritos.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 704508, ~/Articles/ArticleHandler.aspx, 9/17/2014 7:49:54 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement