Buying a mutual fund without studying its top holdings is like buying a car without first checking under the hood. From the outside, the fund could look great, with a strong track record and promising manager, but savvy Fools will always take a closer look at the fund's top stocks before investing, just to make sure they aren't buying a lemon.

This extra research can be a daunting process. It becomes impractical with funds that hold hundreds of stocks. Yet even so-called "focus" funds, with only a handful of stock holdings, still require you to carefully research 20 or 30 stocks. Few people have the time or knowledge to complete a task like that. That's where Motley Fool CAPS and its community of more than 110,000 members can help.

Pray tell ...
Every week, we'll look at one of this year's hottest funds, and see what Main Street investors have to say about its top picks. We'll pay particularly close attention to funds that put a lot of weight in their top 10 holdings.

This week, we'll take a closer look at ProFunds Biotechnology UltraSector (BIPIX). According to Morningstar, it has been one of the year's top performers, raking in 26% returns year-to-date (not bad for a long fund!). The fund charges a slightly pricey 1.56% expense ratio and has an above-average minimum investment of $5,000. The fund's managers, Hratch Najarian and Adam Croll have been with the fund since 2002 and 2005, respectively.

Obviously, the past seven months have been good to this fund, but what about the future? Let's see what CAPS players think about some of the individual stocks in the fund.

Company

% of Assets

CAPS Rating (5 max)

Gilead Sciences (NASDAQ:GILD)

14.47%

*****

Amgen (NASDAQ:AMGN)

13.68%

****

Genentech (NYSE:DNA)

9.51%

****

Celgene (NASDAQ:CELG)

7.57%

****

Genzyme

4.66%

*****

Biogen Idec

4.60%

****

Millennium Pharmaceuticals*

2.39%

N/A

Illumina (NASDAQ:ILMN)

1.31%

***

Invitrogen (NASDAQ:IVGN)

1.27%

****

Charles RiverLaboratories Int'l (NYSE:CRL)

1.16%

*****

Sources: Motley Fool CAPS and Morningstar. Holdings as of April 30.
*Millennium was bougSources: Motley Fool CAPS and Morningstar. Holdings as of April 30.

As you can see, the ProShares Biotechnology UltraSector is wagering over 60% of its net assets on these top 10 picks. Fortunately, CAPS investors seem to think these picks are pretty good: Three of them carry the highest five-star ratings, five received four-stars, and the rest getting passable three stars.

That's important, because in our first year and a half of collecting CAPS data, we've seen that four- and five-star-rated CAPS stocks have tended to outperform the market, while one- and two-star stocks have underperformed. Based on that measure, at least, this fund is making some smart bets.

What do you think about these stocks -- or any stocks, for that matter? Make your voice heard among those of 110,000 other investors on Motley Fool CAPS. Just sign up today, and start rating your favorite stocks. You can even check out the holdings of your favorite funds to see how they stack up. The community has rated 5,500 stocks.

Biogen Idec is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletters today, free for 30 days.

Todd Wenning kept on truckin' until high gas prices rendered it impractical. He does not own shares of any company mentioned. The Fool has a disclosure policy.