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Great Minds Like These Stocks

Both Morningstar analysts and great money managers like these stocks.

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A savvy stock investor will look anywhere for ideas--even if it means stealing them. One fertile hunting ground for great investment ideas is in the portfolios of top money managers. If a savvy manager has loaded up on a stock, chances are that's a stock I want to know more about.

Now that Morningstar rates stocks, I've also been looking at those stocks that get a double endorsement. First, a high star rating from our analysts. Second, a top spot in the portfolio of a great money manager. If a stock gets a 4- or 5-star rating from Morningstar, it means our analysts think the intrinsic value of the stock is greater than the current share price. If proven money managers run the same stock through their own valuation models and reach similar conclusions, that whets my appetite even more.

I poked around the portfolios of some managers who think about stocks the way we do--people like Marty Whitman of Third Avenue Value (TAVFX), Bill Nygren of Oakmark (OAKMX) and Oakmark Select (OAKLX), Chris Davis of Selected American (SLASX), Mason Hawkins and Staley Cates of Longleaf Partners (LLPFX), and Bill Miller of Legg Mason Value (LMVTX) and Legg Mason Opportunity (LMOPX). These managers think hard about the intrinsic value of a stock before buying it, and most of them use cash-flow models similar to the ones our analysts employ to assign star ratings to stocks. So it's no surprise we like many of the same stocks. If you don't believe us when we say something's cheap, maybe you'll believe them.

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