Concentrated Funds Going Against the Grain
A closer look at these funds' favorites.
Our favorite focused funds have added value over the very long haul through stock selection, but the funds' managers typically haven't done that by simply making outsized bets on the largest constituents of their benchmarks. They've often gone against the grain, buying unpopular stocks and those that take up only a small slice of their funds' benchmark. A close look at some of those funds' most recent portfolios and the most commonly held positions among them demonstrates these managers' willingness to deviate from the norm.
We combined 10 of these funds-- Brown Capital Management Small Cap (BCSIX), Clipper (CFIMX), Fairholme (FAIRX), FMI Large Cap (FMIHX), Jensen Quality Growth (JENSX), Longleaf Partners (LLPFX), Mairs & Power Growth (MPGFX), Matrix Advisors Value (MAVFX), Oakmark Select (OAKLX), and Sequoia (SEQUX)--to create a portfolio, and the results were telling. Only three of the portfolio's top 25 holdings are among the S&P 500 Index's 25 largest constituents ( Berkshire Hathaway (BRK.B), Microsoft (MSFT), and Procter & Gamble (PG)), despite the fact that all but one of the 10 funds reside in Morningstar's U.S. large-cap equity fund categories. Conspicuous by their absence from the funds' favorites list are growth darlings such as Apple(AAPL) and Google (GOOG); behemoths in the popular energy sector ( ExxonMobil(XOM) and Chevron(CVX)); and big, slow growers (other than Procter & Gamble), which many think are poised to outperform.
Greg Carlson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.