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Our Ultimate Stock-Pickers' Top 10 Buys and Sells

Fears about the European credit crisis spreading and an increase in investor redemptions impacted our top managers' purchases and sales during the most recent period.

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By Greggory Warren, CFA | Senior Stock Analyst

As you may recall from one of our recent articles, which took an early look at some of the high-conviction buys and new-money purchases being made by our Ultimate Stock-Pickers, much of the trading activity we were seeing during the third quarter of 2011 was reminiscent of the type of transactions we saw during the fourth quarter of 2008 and first quarter of 2009, when managers were selling what have traditionally been more stable names--like  General Electric (GE),  Wells Fargo (WFC), and  Walgreen (WAG)--to help meet redemption requests. This was in stark contrast to the first quarter of 2011, when more than $25 billion flowed into U.S. stock funds (and $15 billion flowed into international stock funds), allowing most of our managers (who were in net inflow mode) to put more money to work in the markets. That trend changed during the second quarter, though, as investors pulled more than $15 billion out of U.S. stock funds (while surprisingly adding some $4 billion to international stock funds) in response to the debt crisis in Europe.

The outflows from U.S. stock funds picked up dramatically during the third quarter, with more money flowing out during the month of July than did during the entire second quarter of 2011, as investors grew more concerned about the European debt crisis, as well as the political wrangling over the debt ceiling here in the United States. While net outflows from U.S. stock funds did ease somewhat in August and September, total net outflows of around $45 billion during the third quarter of 2011 were on par with last year's third quarter, which was the worst period for outflows since the fourth quarter of 2008 (when investors took some $90 billion out of U.S. stock funds). Even though international stock funds weren't hit as badly as domestic stock funds, with only $3 billion flowing out during the third quarter of 2011, it didn't keep our more global managers from being impacted by redemptions. It also didn't help to have outflows from U.S. stock funds pick up pace again in October--to the tune of some $18 billion--with international stock funds seeing some $3 billion flow out during the month, as well. This level of redemption activity means that we're likely to see even more forced selling during the current quarter as managers have to decide between selling stocks that might be losers and trimming back winners in order to raise the cash they'll need to continue to meet investor redemptions.

It was against this background that our top managers were making their portfolio decisions during the third quarter (and early part of the fourth quarter) of 2011. While we continue to see plenty of instances where managers are not moving outside of their comfort zones, sticking with names they already know when they have capital to put to work, we have seen enough of our Ultimate Stock-Pickers moving into new names to have an impact on our list of top buys during the quarter. This was something we had noted a few weeks ago when we did an early read on the buying activity of our top managers, noting that there continues to be a growing interest in technology names on the part of our Ultimate Stock-Pickers. Probably the biggest surprise to us, as well as many other investors who have tracked the holdings, purchases, and sales of Warren Buffett over the years, was the fact that  Berkshire Hathaway (BRK.A) / (BRK.B) took a rather substantial stake in  International Business Machines (IBM). While the insurer was buying up shares of the technology giant during the first, second, third, and fourth quarters of 2011, we didn't hear about it until this month, as Buffett took full advantage of an obscure rule (in Section 13F of the Securities Exchange Act of 1934) that has historically allowed investors like him to withhold purchases or sales from their quarterly filings with the SEC, providing the time (and flexibility) that is sometimes necessary for organizations like Berkshire to build up a position in a stock.

We also found it interesting (once all of the data was collected) that six of the 10 top purchases made during the most recent period had one or more manager actually putting money to work in new names (or, in the case of Berkshire's purchase of IBM, into holdings that had not been previously disclosed). As you may recall, we believe that managers make new-money purchases only when they have a high degree of conviction in the stock that they are buying. That's not to say, though, that managers do not make high-conviction additions to their existing holdings, it's just that we believe it is far easier for them to put money to work in holdings that they are already comfortable with than it is for them to make a bet on a brand new name (let alone one that might have been blown out of the portfolio in a previous period). With regards to the selling activity during the quarter, eight of the top 10 sales involved one or more manager completely eliminating their stake in a company. This ran contrary to what we'd seen over the last several quarters, when many of our top managers were just trimming back positions as opposed to making wholesale moves out of names. This tells us that some of our Ultimate Stock-Pickers are making decisions about the near-term prospects of some of their holdings, using the proceeds from the sales to either build up cash or invest in other names that they feel will hold up better in the current market environment.

Ultimate Stock-Pickers' Top Holdings

  Star Rating Fair Value Uncertainty Moat Size Price (USD) Price/Fair Value # of Funds Holding Mcrsft (MSFT) 4 Medium Wide 24.30 0.76 16 Jhnsn & Jhnsn (JNJ) 4 Low Wide 61.27 0.80 11 Exxon (XOM) 5 Low Wide 73.90 0.75 8 Wells Fargo (WFC) 5 Medium Narrow 23.51 0.52 8 Wal-Mart (WMT) 3 Low Wide 56.89 1.00 13 P&G (PG) 4 Low Wide 61.00 0.85 11 Coca-Cola (KO) 3 Low Wide 64.74 0.95 8 Brkshr Hthwy (BRK.B) 4 Medium Wide 72.89 0.82 8 Pepsi (PEP) 4 Low Wide 62.49 0.82 9 Conoco (COP) 5 Low Narrow 66.14 0.78 9


Data as of 11/25/11. Fund ownership data as of funds' most recent filings.

Even with the changes made to the Investment Manager Roster earlier this year, there haven't been any significant changes in the top 10 stock holdings of our Ultimate Stock-Pickers over the last eight calendar quarters. Only two of the 10 names listed above-- ExxonMobil (XOM) and  PepsiCo (PEP)--were not on the list at the end of the third quarter of 2009. PepsiCo has been a top holding for our managers for much of the last three and a half years, but never quite had enough conviction behind it to get it onto the list of top 10 holdings until the first quarter of 2011. At the time, it supplanted  American Express (AXP), which continues to be a top 20 holding for our Ultimate Stock-Pickers. While we did see one wholesale elimination of PepsiCo during the most recent period, as  Columbia Dividend Income (LBSAX) unloaded its stake in the snack foods giant, much more meaningful purchases by  Oakmark Equity & Income (OAKBX) and the  Yacktman (YACKX) fund were enough to not only keep PepsiCo in the top 10 holdings, but to make it a top 10 purchase candidate, as well. Commenting recently on their stake in PepsiCo, which accounted for 13% of their fund's stock holdings at the end of the third quarter, the managers at Yacktman noted that "PepsiCo, News Corp, and Microsoft are among our largest holdings because each company has a good business and is selling at a very attractive price."

With regard to ExxonMobil, it jumped onto the top 10 holdings list in the first quarter of 2010, after  Alleghany (Y) dumped most of the proceeds it received from the sale of its stake in Burlington Northern Santa Fe, which was acquired in full by Berkshire Hathaway in February 2010, into the energy giant. While Alleghany had been in the process of whittling down its stake in Burlington Northern, which at one time had accounted for more than 40% of its total stock holdings, the purchase of the railroad by Berkshire had dropped a lot of cash in Alleghany's hands, with much of it finding its way into ExxonMobil, which accounted for more than 40% of its total stock holdings at the end of the third quarter of 2011. Although it would be imprudent not to admit that Alleghany's stake in ExxonMobil weighs heavily on the stock's positioning in the top 10 holdings, it should also be noted that seven other Ultimate Stock-Pickers hold positions in the energy giant, with four of them-- Amana Trust Income (AMANX), Columbia Dividend Income,  Markel (MKL), and  Oakmark (OAKMX)--maintaining meaningful stakes in the name (relative to the average position size in their portfolios). As for trading activity during the most recent period, we saw three of these managers adding to their stakes in ExxonMobil, with Oakmark making a meaningful addition to its stake in the energy giant.

Looking at the trading activity among the other top 10 holdings, our Ultimate Stock-Pickers were net buyers of  Microsoft (MSFT), which was also a top 10 purchase for our managers during the quarter. That's not to say that some of our managers weren't looking at Microsoft as a source of cash, as both  Jensen Quality Growth (JENSX) and  Sound Shore (SSHFX) sold shares during the quarter, it's just that the collective buying of eight of our managers, five of which-- Dodge & Cox Stock (DODGX),  FMI Large Cap (FMIHX),  Hartford Capital Appreciation (ITHAX), Columbia Dividend Income, and Oakmark--were making meaningful purchases during the quarter, was more than enough to not only offset the sales but lift Microsoft to the top spot on our list of top 10 purchases. With regard to  Johnson & Johnson (JNJ), which actually saw six of our managers adding to their stakes during the third quarter, it fell just short of our list of top 10 purchases due to a meaningful sale by Berkshire Hathaway, which we highlighted in our last article. While Berkshire does continue to add to its stake in Wells Fargo, picking up another 9 million shares during the third quarter, it wasn't enough to keep our top managers from being net sellers of the bank during the third quarter, as meaningful sales by Hartford Capital Appreciation,  Parnassus Equity Income (PRBLX), and  Mutual Shares (TESIX) helped land the stock on our list of top 10 sales for the period.

Our top managers were also net sellers of  Coca-Cola (KO), with a meaningful sale by Jensen Quality Growth completely offsetting a meaningful purchase of the soft drink giant by Columbia Dividend Income during the third quarter. The same set of circumstances also impacted Berkshire Hathaway, which was sold with some conviction by Fairholme Capital Management (no doubt to meet the rash of redemptions that Bruce Berkowitz has faced for much of the last three quarters), detracting from the fairly meaningful purchase made by  Tweedy Browne Value (TWEBX) during the third quarter. We're doubtful that either trade was made before Warren Buffett announced that Berkshire would be buying back shares at the end of the third quarter, which not only lifted the Class A shares more than 7% on the date of the announcement, but has also kept them 10% higher than the closing price for the Class A shares on the last trading day before the announcement was made at the start of the last full week of trading in September. That said, it looks like those managers that held on to or bought additional shares during the quarter (a total of four out of the eight managers still holding the stock at the end of September) made out better in the near term than the three managers that were selling. 

Another top 10 holding that received attention from our Ultimate Stock-Pickers during the period was  Wal-Mart (WMT), which was held by 13 of our top managers coming into the third quarter. Of these 13 managers, seven of them were adding to their stakes in the retail giant, with  FPA Crescent (FPACX) actually making a fairly meaningful increase to its stake in the firm. The managers at FPA Crescent didn't stop there, though, establishing new stakes in two other world-class retailers,  Tesco (TSCO) and  Lowe's (LOW), the latter of which made our top 10 purchases list during the quarter (due largely to the significant new-money purchases made by both FPA Crescent and Sound Shore during the period). The managers at FPA Crescent noted the following about their purchase of stakes in both Tesco and Lowe's:

"The companies have what we believe to be practically bulletproof balance sheets, attractive operating economics, competitively important real estate holdings, muted risk of internet-based business disruption, and a commitment to improving return on invested capital (ROIC) and to returning capital to shareholders. Both companies were purchased at less than 10 times our estimate of normal owner earnings."

They went on to note that they "believe Lowe's is operating somewhere near the bottom of a significant industry downturn (home improvement spending is at the lowest percentage of GDP in 70 years)," and that while they don't expect earnings to improve materially until the U.S. economy improves, "Lowe's is aggressively repurchasing stock (10% of the company per year, based on our purchase price)."

Looking at the remaining top 10 holdings, our top managers were also net buyers of  Procter & Gamble (PG), with five of the 11 managers holding the stock at the end of the second quarter adding to their positions. Of note was the fact that two of these managers-- Aston/Montag & Caldwell Growth (MCGIX) and Parnassus Equity Income--made meaningful additions to their stakes in Procter & Gamble during the third quarter. Even more interesting is the fact that these same two managers also made conviction purchases during the second quarter of 2011. With so many managers buying shares of the consumer products giant during the third quarter, Procter & Gamble became our third top-10 holding to also make the top 10 purchases list during the period. While it did not grace the list of top purchases,  ConocoPhillips (COP) was the recipient of a meaningful new-money purchase during the quarter, as Sound Shore initiated a stake in the integrated oil and gas firm. This increased the number of Ultimate Stock-Pickers holding ConocoPhillips to nine at the end of the third quarter, helping to lift it back into the top 10 holdings after it lost some ground to  Cisco Systems (CSCO) during the second quarter.

Ultimate Stock-Pickers' Top Purchases

  Star Rating Fair Value Uncertainty Moat Size Price (USD) Price/Fair Value # of Funds Buying Mcrsft (MSFT) 4 Medium Wide 24.30 0.76 8 Omnicom (OMC) 4 Medium Narrow 40.02 0.80 4 Intl Bsnss Mchns (IBM) 3 Low Wide 177.06 0.97 2 Pepsi (PEP) 4 Low Wide 62.49 0.82 4 Lowe's (LOW) 4 Medium Wide 22.68 0.76 3 Rsrch in Mtn (RIMM) 4 High None 16.00 0.62 3 Untd Prcl Srvc (UPS) 4 High Wide 66.46 0.83 6 P&G (PG) 4 Low Wide 61.00 0.85 5 Schwab (SCHW) 5 Medium Narrow 10.77 0.49 5 Visa (V) 3 Very High Wide 89.02 0.85 4

Data as of 11/25/11. Fund ownership data as of funds' most recent filings.

Looking at the top 10 purchases made during the most recent period, the list was a bit more broadly spread out among technology, consumer cyclical, consumer defensive, industrials, and financial services names, as opposed to the second quarter of 2011, when technology and financials dominated the list. It is also interesting to note how the top 10 purchases vary somewhat from the high-conviction purchases we noted a few weeks ago,when we had data on 21 out of our 26 top managers, and names like  Google (GOOG),  Abbott Laboratories (ABT), and  Sysco (SYY) made the list. It just goes to show you the influence that a handful of managers can have, especially when someone like Warren Buffett goes and makes IBM his second-largest stock holding (at 17% of Berkshire's equity portfolio at the end of the third quarter). To be fair, though, we balanced out Berkshire's purchase of IBM, which started with more than 4 million shares in the first quarter of 2011, and another 20 million shares in the second quarter, to include only the 32 million shares that were picked up during the third quarter. That said, it was still a meaningful purchase for the insurer, which, when added to the other purchases of IBM that were made during the quarter, more than compensated for the meaningful sales that were made by  Columbia Value & Restructuring (EVRAX), Hartford Capital Appreciation, and  Matrix Advisors Value (MAVFX).

Having already delved into the purchases of Microsoft, PepsiCo, Lowe's, and Procter & Gamble during the quarter, we'll limit ourselves to the remaining five top purchases to make our list.  Omnicom (OMC) is interesting in that it is a consumer-cyclical name focused on advertising and marketing services, which have hardly been what we could call robust. That said, the shares did get pummeled during the third quarter, providing three of our managers--FMI Large Cap, Aston/Montag & Caldwell Growth, and Oakmark--with an opportunity to make meaningful purchases for their funds. As we noted a few weeks ago, the managers at FMI Large Cap had made a significant new-money purchase in the name during the third quarter, noting that the business is "somewhat misunderstood by the investment community," with much of Wall Street being "overly focused on expensive, pure-play digital advertising stocks," while "undervaluing the broad-based, diversified advertising services companies like Omnicom." While the same exact language cannot be applied to  United Parcel Service (UPS), it is another firm on the list of top 10 purchases whose fortunes are tied almost directly to the health and direction of the global economy. While nine of our top managers held stakes in the global transportation and logistics firm at the start of the third quarter, six of them added to their stakes, with Parnassus Equity Income nearly doubling its position in the company.

With regard to  Research in Motion (RIMM), which was held by three of our managers at the beginning of the third quarter, we saw all three of them adding to their stakes during the quarter, with the Hamblin Watsa Investment Council at  Fairfax Financial Holdings (FRFHF) actually increasing the Canadian insurer's position in the producer of the BlackBerry line of mobile phones by more than 40%. Also of note was the fact that the managers at Yacktman, which had made a meaningful new-money purchase in the name during the second quarter, continued to add to their stake in Research in Motion during the most recent period. While still a smaller holding in their fund, Donald and Stephen Yacktman took advantage of the steep drop in the share price during the third quarter to increase their stake by more than 15% during the period. The question remains, though, as to whether or not any of our managers continued to buy during the fourth quarter, as the shares declined another 20% from their third-quarter lows--no doubt on news that its share of the fast-growing smartphone market had fallen to somewhere near 10% compared with 20% just eight quarters ago. It also didn't help to have a global service disruption in the middle of October that not only frustrated millions of its BlackBerry customers, but also renewed calls for sweeping changes at the firm. Our analyst, Michael Holt, continues to believe that Research in Motion displays many of the characteristics of a "classic value trap," noting that the window for a turnaround at the firm is quickly closing.

Looking more closely at  Charles Schwab (SCHW), which was held by four of our managers at the start of the third quarter, the company continues to garner interest from all of these managers, with  Vanguard PRIMECAP (VPMCX) making a meaningful addition to its holding during the period. On top of that, a fifth manager--Matrix Advisors Value--made a meaningful new-money purchase in the nation's leading discount brokerage firm during the third quarter, noting the following about its purchase:

"Schwab has a strong business, and is not subject to the mortgage/credit issues that garner so many of the negative headlines in the financial services world. Schwab was purchased for a significant discount to its normal valuation, a discount that does not correlate to the continued success of the business, but rather reflects the across-the-board anxiety directed at any financial services company."

Committed to staying invested in the financial services sector, but only riding "the strongest horses in it," the managers at Matrix Advisors Value might also want to take a closer look at  Visa (V), which was a new-money purchase for two--Berkshire Hathaway and Aston/Montag & Caldwell Growth--of the five managers that held it at the end of the third quarter. That said, there was some dissension in the ranks, as Columbia Value & Restructuring completely eliminated its stake in Visa as part of a clearing out of financial services names--including  PNC Financial (PNC),  Citigroup (C), and  Goldman Sachs (GS)--the latter of which made our list of top 10 sales during the quarter due in large part to a major sale by Fairholme Capital Management. Viewing the sales of many of the financial services firms during the third quarter as an easy way to raise cash (given the fact that they are unloved and continue to trend down on the European credit crisis and the increased regulatory environment, especially for the banks and the investment banks), there was plenty of pressure on the sector overall to create some buying opportunities in some of the higher-quality names in the sector, including Visa (which operates the world's largest credit and debit card networks in terms of cards outstanding and purchase volume, has few direct competitors, has unmatched scale in the market, and is endowed with a wide economic moat).

Ultimate Stock-Pickers' Top Sales

  Star Rating Fair Value Uncertainty Moat Size Price (USD) Price/Fair Value # of Funds Selling Kraft (KFT) 4 Medium Narrow 34.32 0.88 4 Cisco (CSCO) 5 Medium Wide 17.50 0.67 3 Wells Fargo (WFC) 5 Medium Narrow 23.51 0.52 4 Gldmn Schs (GS) 5 High Narrow 88.75 0.49 3 Gnrl Elctrc (GE) 5 Medium Wide 14.70 0.59 5 Walgreen (WAG) 4 Medium Narrow 32.47 0.88 3 Nwmnt Mining (NEM) 3 High None 63.77 1.01 2 JPMorgan (JPM) 5 High Narrow 28.48 0.47 4 Consol (CNX) 4 High None 35.29 0.68 3 Accntr (ACN) 4 Medium Narrow 53.70 0.85 4

Data as of 11/25/11. Fund ownership data as of funds' most recent filings.

Unlike the top purchases, the top 10 sales during the third quarter seemed to be segregated into three distinct buckets: large-cap liquid stocks that held up well (relative to the market) during the period and could be easily converted to cash, like Cisco Systems and  Accenture (ACN); large-cap liquid stocks that did not hold up all that well during the period but could still be readily converted to cash, like  Kraft Foods (KFT) and Walgreen; and financial services, industrials, and basic material firms--like Wells Fargo, Goldman Sachs,  JPMorgan Chase (JPM), General Electric,  Newmont Mining (NEM) and  Consol Energy (CNX)--that might get crushed in the event that the European debt crisis triggers a global credit crisis and recession. Looking at these sales in this way, it is not too surprising to note that eight of the top 10 sales noted above had one or more manager that held the stock at the start of the third quarter completely eliminating their stake in the period. While we've seen some period of stronger selling activity since the collapse of the credit and equity markets in the third and fourth quarters of 2008, we've not seen this type of selling activity since that time.

Looking more closely at the first group, Cisco Systems had made our list of top 10 purchases in each of the last four calendar quarters, only to fall prey to its own success during the third quarter (as it outpaced the S&P 500 Index by some 1,400 basis points). While 11 managers had held Cisco at the end of the second quarter, sales by three of them--Matrix Advisors Value, Parnassus Equity Income, and  RS Capital Appreciation (RCAPX)--were enough to not only get the name on our top 10 sales list, but also to bump it from the list of top 10 holdings (which Cisco had ascended to during the second quarter of 2011). Of the wholesale elimination of Cisco from its stock portfolio, the managers at RS Capital Appreciation--which also blew out  Colgate-Palmolive (CL),  Republic Services (RSG), and  Thomson Reuters (TRI) during the third quarter--noted that as "the specifics of Cisco's anticipated restructuring efforts unfolded, our confidence in the company's ability to meet our already-conservative base-case expectations diminished." Nothing quite so dramatic could be said about Accenture, though, which saw meaningful sales by both FMI Large Cap and Parnassus Equity Income, but had no one selling its shares outright. Having tracked the S&P 500 Index fairly closely during the third quarter, Accenture was probably an easier source of cash than some other names in the portfolios of those that were selling.

With regard to the second grouping, Kraft Foods was completely eliminated from the equity portfolio at Fairfax Financial, which had held the packaged foods giant as a top-10 holding (accounting for 7% of its total stock holdings) at the end of the second quarter of 2011, with both Berkshire Hathaway and Hartford Capital Appreciation making meaningful reductions in their stakes. The sales were no less dramatic for Walgreen, as  Dodge & Cox Stock (DODGX), Aston/Montag & Caldwell Growth, and Oakmark all removed the drugstore giant from their stock portfolios. In their quarterly commentaries, the managers at both Oakmark and Aston/Montag & Caldwell Growth noted Walgreen's escalating war with Express Scripts as their main reason for selling the stock, with Ronald Canakaris noting the following about his fund's sale:                       

"We sold Walgreen due to management's apparently entrenched negotiating position with pharmacy benefit manager Express Scripts. Although management is convinced it would be able to retain customers even if Express Scripts drops Walgreens from its plans, most observers believe Walgreen's position will weaken over time, as consumers may accept and become accustomed to a new pharmacy."

Looking at the final grouping, it should be noted that the financial services sector as a whole got crushed in the third quarter (and was the worst performing sector overall out of Morningstar's 11 different stock sectors), such that in each case where one or more of our managers were selling, there were others that were buying the very same names. In the case of Wells Fargo, we already noted that Warren Buffett had picked up more shares during the third quarter, with five other managers also buying the stock, but it wasn't enough to keep our Ultimate Stock-Pickers from being net sellers, as meaningful sales by Hartford Capital Appreciation, Mutual Shares, and Parnassus Equity Income helped land the stock on our list of top 10 sales for the period. Just about the same story line could be written for JPMorgan Chase and Goldman Sachs, each of which saw fairly meaningful purchases from some of our top managers, only to be dragged down by much larger sales at several of our other Ultimate Stock-Pickers. General Electric did not suffer the same sort of fate, though, as the selling was far more aggressive, with Ronald Canakaris at Aston/Montag & Caldwell Growth noting the following about his fund's sale:

"Despite General Electric's attractive valuation, we sold the stock, as it was not as defensive as we had expected. This likely reflected investor concerns about a new round of credit losses at its GE Capital financial division and/or the likelihood that decelerating economic growth may push out its recovery to the later-cycle industrial businesses."

As for the final two names on the list, Newmont Mining and Consol Energy, the selling was just as aggressive as it was for General Electric. In the case of Newmont, it was completely eliminated from Alleghany's stock portfolio, and was sold with a fair amount of conviction at Sound Shore. With regard to Consol Energy, two of the three managers holding the stock at the start of the third quarter-- Amana Trust Growth (AMAGX) and Hartford Capital Appreciation--blew it out during the third quarter, with the third--Sound Shore--cutting its stake by more than half. Looking over all of the basic-materials holdings of our top managers, it looks like our Ultimate Stock-Pickers were net sellers of the sector during the third quarter, which isn't too surprising given their economic sensitivity, as well as the fact that it was the second-worst-performing sector during the period.


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Disclosure: Greggory Warren own shares in the following securities mentioned above: Amana Trust Growth, Amana Trust Income, Colgate-Palmolive, Kraft Foods, and Procter & Gamble. It should also be noted that Morningstar's Institutional Equity Research Service offers research and analyst access to institutional asset managers. Through this service, Morningstar may have a business relationship with fund companies discussed in this report. Our business relationships in no way influence the funds or stocks discussed here.

The Morningstar Ultimate Stock-Pickers Team does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.