As investors we are always looking for an edge, and there are many to be had. One of the greatest edges we have as small, individual investors is that we don't have to disclose our positions in companies. This is not true for large institutional investors, who must report their holdings to the SEC each quarter. These filed reports known as 13-F's are required for funds with more than $100 million under management. A look at some of these holdings allows us to follow in the footsteps of some of the best.
The global edge
We need look no further than this week's economic data to see why it makes sense to own a diversified global portfolio of stocks. The market saw its biggest gains in more than two months on Wednesday, thanks in part to an expansion in manufacturing in China, as well as better than expected Australian GDP numbers. The markets shrugged off poor U.S. job data that showed the private sector lost 10,000 jobs versus an expected increase of 13,000. As the global economy continues its growth, it makes sense for investors to look overseas for investing opportunities.
One mutual fund that has been taking advantage of opportunities both overseas and domestically is the John Hancock Global Opportunities Fund. The fund is run by Christopher Arbuthnot and was recently named by Bloomberg as the top global equity mutual fund. The fund posted a 30.7% gain for the year ended June 30 and has an annualized return of 10.2% over the past 5 years. More than 34% of the fund's capital is allocated to emerging markets, but Arbuthnot also has big bets on the U.S., as well as in Europe. Let's look at what Arbuthnot finds attractive right now, and do some of our own research to see if his picks would fit in our own portfolio.
Sirius XM Radio
Arbuthnot's top holding is a hotly debated stock. Sirius XM Radio shares are obviously trading at less than a dollar for a reason, but there are certainly opportunities for growth. As one Fool suggests, the opportunity may be increasing car sales. The company has agreements with automakers, including Ford
OGX Petroleo & Gas
U.S. investors may be familiar with Brazilian oil and gas powerhouse Petroleo Brasileiro
Warren Resources
Warren Resources is another top small-cap pick for the fund. It is a domestic oil and gas development company involved in onshore exploration. With large natural gas reserves, the company has been hurt by the continued weakness in natural gas prices, but Arbuthnot seems to betting on a turnaround for natural gas in the near future.
Denbury Resources
Arbuthnot's fund is one of many that have been picking up shares of oil and gas producer Denbury in recent months, as the stock has seen a large increase in institutional buying. Denbury is unique because it specializes in tertiary oil recovery from existing oil fields, so it doesn't have the huge costs involved in discovery and exploration that many of its competitors have.
Vodafone
Vodafone is the world's largest telecom company with operations all over the globe. The company also owns 45% of Verizon Wireless, its joint venture with Verizon
My take
It's easy to see from these stocks that Arbuthnot certainly has a big appetite for risk. This appetite clearly served investors in the fund well during the bull market in 2009, but you should also be aware that the downside will be greater if the market slips. In this regard, I don't recommend allocating the largest position in your portfolio to such picks. Speculative stocks like Sirius XM and Warren Resources have a place in every individual investor's portfolio; just remember to balance them with shares of high-quality blue-chip stocks as well.
How often do you follow gurus' stock picks? Do you agree with Arbuthnot's top picks? Let us know in the comment box below.
