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 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 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 Sequoia (SEQUX). According to Morningstar, it has outperformed the S&P 500 by a full four percentage points over the past year, and just over two points over the past 10. The fund charges a decent 1% expense ratio, but has an above-average minimum investment of $5,000. The fund's managers, Robert Goldfarb and David Poppe, have been with the fund since 1998 and 2005, respectively.

Sequoia has done fairly well in both short- and long-term periods, but what about the future? Let's see what CAPS players think about some of the individual stocks in the fund.


% of Assets

CAPS Rating (5 max)

Berkshire Hathaway (NYSE:BRK-A)



Mohawk Industries (NYSE:MHK)



Martin Marietta Materials (NYSE:MLM)



Fastenal Co. (NASDAQ:FAST)



TJX Companies



Porsche Automobil Holding SE



Idexx Laboratories



Progressive Corp. (NYSE:PGR)



Target (NYSE:TGT)



Bed Bath & Beyond (NASDAQ:BBBY)



Sources: Motley Fool CAPS and Morningstar. Holdings as of March 31. NR = not rated.

As you can see, Sequoia is wagering a hefty 70% of its net assets on these top 10 picks. That's a significant bet, but CAPS investors seem to be on the fence with these picks: one receives the highest five-star rating, two get four stars, five get three stars, and one has two 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.

Berkshire Hathaway and Bed Bath & Beyond are both Motley Fool Inside Value and Motley Fool Stock Advisor selections. The Fool owns shares of both companies.

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.