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Special Report

Stocks That Fund Managers Are Buying

Value stocks and funds continue to be in favor.

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Value stocks and funds continue to be in favor, and that's influencing what fund managers are buying for their portfolios. Those in the value camp are sticking to their guns, while at least one aggressive-growth manager is adjusting his strategy.

Longleaf Likes Marriott, GM
The value revival has certainly lifted Longleaf Partners Fund (LLPFX), but the fund's managers remain content with the portfolio's position and haven't been buying many new stocks. They continue to like the prospects of longtime holdings such as Marriott International (MAR), General Motors (GM), and Waste Management (WMI). In Marriott's case, the managers agree that a slowing economy will reduce the hotels' occupancy rate, but Longleaf's management still thinks the firm will grow income by more than 15% this year--a great achievement in the current economic environment. As for GM, the fund managers predict that this company will fight a headwind this year, but they're encouraged by the automaker's cost-cutting plan and after taking non-auto assets into account, this stock looks like a cheap one.

Janus Orion Picks Hospital Operators
Meanwhile, Janus Orion (JORNX) is venturing into new territory. The aggressive-growth fund is building positions in hospital operators such as Healthsouth (HRC) and Tenet Healthcare (THC). Manager Ron Sachs says that he thinks the economic slowdown will last longer than most are expecting, so he wants to own firms that have what he terms, "recurring revenues." Hospital operators fit the bill because their sales can remain steady in otherwise turbulent economic conditions. Hospitals also are benefiting from some recent HMO rate hikes.

Oppenheimer Global Makes a Play for Video-Game Firms
But not everyone has given up on more-aggressive areas of the market. Peter Wilby, manager of Oppenheimer Global (OPPAX), thinks the impending arrival of Microsoft's Xbox and Nintendo's GameCube will benefit video-game software companies because it will spur demand for their products. Wilby's top position in this space is Electronic Arts (ERTS). He has also been buying Japan's Konami and Nintendo (NTDOY), a stock he had owned for many years but then sold.

Other stocks that have emerged during Morningstar's conversations with fund managers include:

  • Microsoft  (MSFT): MFS Strategic Growth's manager thinks some software stocks could have a good run later in the year.
  • Nokia  (NOK) and Ericsson  (ERICY): Leave it to the folks at New Perspective to take a bit of a contrarian approach. These two cellular stocks are now in their top 10.

Kunal Kapoor does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.