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Spy
on Fund Managers
Around a year ago, in the spirit of working smarter
rather than harder, I advised looking over top mutual fund manager’s
shoulders to see what stocks they’re buying. After all, picking stocks
is their day job. Besides, many of them have squads of analysts helping
them find worthwhile candidates, and they’re better wired into what’s
happening than you or I can ever hope to be.
Regrettably, most mutual fund managers don’t
publish their holdings in a timely manner for fear of letting the
competition in on their thinking. Fortunately, enough do report at least
their top 10 holdings quickly enough to supply us with a steady stream of
worthwhile stock ideas.
Here are funds that I recently discovered or didn’t
have room to mention last year. All update their top 10 holdings monthly,
usually by the middle of the following month. Also, since there’s no
point in getting tips from managers down on their luck, I restricted the
list to funds rated five stars (best) by Morningstar.
Royce Funds
Royce Funds runs more than a dozen funds, but they
all invest primarily in small, value-priced companies. While many
investors favor large companies (large-caps), I think there’s an
advantage to seeking out smaller firms.
Why? Because the media and most investing gurus
usually focus on large companies. The virtues and failings of these stocks
are rehashed so often that it’s difficult to find promising yet
undiscovered large-cap names in either the value or growth categories.
Royce follows a classic value-investor’s approach
to picking candidates. It looks for good companies that are either
undiscovered or have recently stumbled. Despite their current hard times,
Royce demands strong balance sheets and the ability to generate strong
profits and high cash flows when the firms overcome their current
problems.
Currently, the Royce Special Equity, Total Returns,
and Value funds carry five star ratings. Of those, Special Equity is your
best bet because it has a relatively low 22 percent annual turnover rate.
Turnover measures how fast a fund buys and sells stocks. For instance, a
100 percent turnover means that, on average, the fund changes its entire
portfolio annually.
By contrast, the Royce Value fund has a 181 percent
annual turnover, which means that, on average, it completely changes its
holdings every seven months or so. That makes the fund a poor resource for
investing ideas because, even though it reports it holdings monthly, it
may not still own the listed stocks by the time you see the list.
The Royce Total Return fund has a low 20 percent
turnover rate, however it holds more than 400 stocks. That makes it a
questionable resource, because, with that many holdings, appearing on the
top 10 list doesn’t necessarily signal much of a commitment.
The Royce 100, a new fund, started about a year ago,
is worth checking. The fund hasn’t been around long enough to earn a
Morningstar rating, but it has gained more than 15 percent in the past 12
months, and almost 10 percent so far this year.
To download the top holdings, select Fund Guide on
Royce Funds homepage (www.roycefunds.com),
click on View Our Funds (top banner), select the fund of interest
and then scroll down until you see the top 10 holdings for the previous
month.
Vanguard
Vanguard is known mostly for its index funds. But it
has two managed funds, Vanguard Energy, and Vanguard Heath Care, that are
good resources for stock ideas in those sectors. Both have low turnover
ratios, so their picks should be current. Vanguard Energy has been on a
real tear lately, up 45 percent over the last 12 months.
From Vanguard’s homepage (www.vanguard.com), select
Personal Investors, click on Research Funds &
Stocks, and then enter
the fund name or ticker symbol. It’s faster to use the ticker symbols,
which are VGENX for the energy fund and
VGHCX for the healthcare fund.
Once you’re on the main page for each fund, click on Holdings to see top
10 stocks. Both funds hold mainly large-cap stocks.
Munder
Market veterans undoubtedly remember Munder from the
bubble days when its NetNet fund specializing in Internet stocks was all
the rage for a year or so until it crashed and burned when the bubble
burst. But Munder has come a long way and offers more than a dozen funds;
many highly rated. Two have five-star rankings: the MidCap Select and the
Small-Cap Value.
The MidCap Select, a growth fund, sports a
market-beating 20% return over the past 12 months. The value fund did even
better, pleasing its shareholders with a sizzling 29 percent 12-month
return. Both have moderate turnover ratios, 53 percent for MidCap Select,
and 43 percent for Small-Cap Value, making them good stock idea resources.
You can get to each fund’s information directly
from Munder’s homepage (www.munder.com). In addition to previous
month’s top 10 holdings, you can also see a complete list of all of a
fund’s holdings from the prior month.
Just like us, mutual fund managers pick their share
of clunkers. So being listed in a fund’s top holdings doesn’t
guarantee that it’s heading higher. Nevertheless, why reinvent the
wheel, a top fund manager’s picks is a good resource for stock ideas.
published 10/3/04
Here's
the Earlier Column on the Same Topic
You can spend
serious money getting stock tips from so-called experts, but there are a
few professional stock pickers that give away their list of favorite
stocks for free every month.
I’m talking
about mutual fund managers. Not all mind you, just those willing to post
their top holdings on a timely basis. While it’s true that most funds
post their top holdings on their websites, the data is usually too out of
date to be of use.
Here are my
favorite funds that post their top-ten portfolio holdings monthly, all
within two weeks after month’s end.
Thornburg
Investment Management
I’ve listed Thornburg (www.thornburginvestments.com)
first because the firm goes the extra mile for investors like us. Not only
does Thornburg update its holdings quickly, but it also provides a
reasonably in-depth three or four paragraph description of most, if not
all, of each fund’s holdings, not just the top ten. There’s more.
Thornburg also includes monthly commentaries written by each of its fund
managers overviewing their portfolio changes during the past month, along
with their take on current market and economic conditions. Thornburg runs
three funds with portfolios you should find interesting.
Its newest, the
Investment Income Builder Fund, invests in bonds as well as
dividend-paying stocks, both foreign and domestic. U.S.-based stocks
comprise about 46 percent of the portfolio, and that is the area of most
interest, at least to me. This is the only fund in the fast-update
category that emphasizes dividend stocks. Formed just last December, the
fund has returned 15 percent, year-to-date.
Thornburg’s Value
Fund, run by Bill Fries since its inception in 1995, is a value fund
with a twist. Most of its holdings are undervalued stocks using
traditional gauges such as price/earnings and price/book ratios. However
its portfolio also includes picks that Fries considers undervalued based
on their earnings growth potential, even though they don’t necessarily
fit the traditional value mold.
Thornburg’s
Core Growth, another relatively new fund formed in December 2000
focuses on growth stocks ranging from upstarts such as jetBlue airlines to
stalwarts like Microsoft. The fund got off to a rough start during its
first two years, but is up 43 percent, year-to-date.
Find each of
Thornburg’s fund portfolio holdings and market commentary from its homepage
by selecting ‘Funds’
from the top menu.
Turner
Investment Partners
Turner (www.turner-invest.com)
operates 15 different value, growth, and industry specific stock funds. Micro-cap
Growth, its best performer, has returned an eye popping 33 percent, on
average, for each of the past five years. To put that in perspective, the
market, as measured by the S&P 500 index, lost around 1 percent, on
average, annually, during the same period. The fund is closed to new
investors, but that doesn’t stop us from looking at its holdings.
Turner’s New Enterprise fund, focusing on tech, leads the pack
this year, racking up a 58 percent, year-to-date return.
Turner is fast.
It updates its top 10 holdings lists within a couple of business days
after the end of each month.
Find Turner’s
fund portfolio listings from its homepage
by selecting ‘Individual
Investors,’ and then clicking on a fund name in the Tuner Funds
Daily NAV section.
Buffalo
Funds
Buffalo (www.buffalofunds.com)
operates a small family of six stock funds, all above-average performers.
Its best-known fund, Buffalo Small-Cap, has returned 31 percent
year-to-date, and 20 percent annually, on average, over the past five
years. It’s new Science & Technology Fund, established in
April 2001, up 35 percent year-to-date, is Buffalo’s best performer so
far this year.
Buffalo updates
each fund’s top ten holdings list monthly, around the 10th of the
following month. Get there from Buffalo’s homepage
by selecting Fund
Information (top menu).
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