Imitation is the sincerest form of flattery, right? Well, when you're learning a new skill, imitation can also be a great way to hone your craft.

If you're learning guitar, you might pick up a book of Jimi Hendrix's licks, or download the chords to a couple of Bob Dylan's songs. So when you're trying to become a better investor, it only makes sense to take a peek at what the professional investors are up to.

For the Fools who don't have the time or inclination to pick individual stocks on their own, Shannon Zimmerman at the Fool's Champion Funds newsletter has put together a collection of mutual funds that have collectively outperformed their benchmarks by 15%. The rest of us, can tune in directly to what some of the major funds are holding.

You see, the SEC requires institutional investment managers who manage $100 million or more to show their holdings via quarterly 13-F filings. This week, I dug up Legg Mason's (NYSE:LM) holdings. To make things even more interesting, I cross-referenced those holdings against what players in the Fool's CAPS community had to say about the stocks.

Below are five of Legg Mason's larger holdings that have also been highly rated by CAPS players.

Stock

Market Value of Legg Mason Stake

CAPS Rating (out of 5)

DirecTV Group (NYSE:DTV)

$1.3 billion

****

Level 3 Communications (NASDAQ:LVLT)

$684 million

****

Cleveland-Cliffs (NYSE:CLF)

$381 million

*****

Qualcomm (NASDAQ:QCOM)

$304 million

****

Texas Instruments (NYSE:TXN)

$283 million

****
Sources: SEC Filings, Yahoo! Finance, and CAPS as of July 15.

Now, before you make any hasty moves, remember that we're looking at what Legg Mason has done in retrospect. For all we know, since its last 13-F filing, the firm has drastically reduced its holdings in any or all of the above stocks. With that in mind, here are some thoughts on a couple of these stocks to kick off further research.

Jumping on the Cleveland-Cliff
Although they have taken somewhat of a back seat to the rising price of oil, metals have been a great sector recently. Cleveland-Cliffs shareholders have been big beneficiaries of this strength -- the stock has soared 141% over the past year.

Cleveland Cliffs is a global supplier of iron ore pellets and the largest producer in North America. Iron is a particularly important metal because of its use in the production of steel -- an alloy that consists primarily of iron. As with many basic materials, China has been driving a significant amount of demand for steel and iron as it continues to grow like crazy.

Because of the cyclicality of the steel industry, it's particularly important for iron ore producers to have good relationships with their steelmaking counterparts. In the case of Cleveland-Cliffs, 98% of its North American production goes to steelmakers, and 91% goes to five customers with whom the company has supply agreements. ArcelorMittal (NYSE:MT), its largest North American customer, accounted for 44% of Cleveland-Cliffs' 2006 North American sales. Algoma, Severstal, WCI, and Stelco are also major customers.

Many CAPS players have jumped on the Cleveland-Cliffs bandwagon because they believe it could be a takeover target -- not a crazy assumption, given the amount of M&A activity going on in the sector. qasimodo, one of the 88 CAPS All-Stars who have tagged the stock as an outperformer, likes the way the company has been expanding:

This company holds an exclusive position in providing iron ore for processing. Traditionally based out of the Great Lakes region, it has been expanding its influence to be a global player with its recent purchase of iron ore companies in Australia and in Brazil. Due to the continued expansion and modernization efforts of China, I expect that this commodity will continue to be in demand for the next decade.

Although Legg Mason is currently the largest Cleveland Cliffs shareholder with a 10.7% stake, Tontine Capital (a hedge fund), Wellington Management, Barclays, and Capital Research also own 5%-plus chunks of the company.

Eager to read more commentary from the CAPS community on these Legg Mason-owned stocks? Hop on over to CAPS and start interacting with the other 60,000-plus CAPS players. While you're checking out these stocks, you can also find out more about over 4,700 other stocks that are currently rated on CAPS.

More CAPS Foolishness:

Legg Mason is an Inside Value newsletter recommendation. You can find out why with a 30-day free trial of the newsletter.

Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. The Fool's disclosure policy invests like a pro, but has been told that it plays ball like a girl. Then again, girls play good ball.