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Medalist Funds Like These Large-Cap Stocks

We crunch the numbers to see which stocks are most widely held among analyst-recommended large-cap funds.

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Picking the right stocks can be a daunting challenge for individual investors. After all, unless you're a fund manager or an equity analyst, you probably don't have an abundance of time to research dozens of companies to separate the wheat from the chaff. One place to look for help is Morningstar's Ultimate Stock-Pickers feature, in which we examine the portfolios of funds managed by some of our favorite active managers to identify holdings they have in common. 

For this week's Five-Star Investor, we applied a similar approach across all medalist funds in the three domestic large-cap categories. Medalist funds are those that have earned Morningstar Analyst Ratings of Gold, Silver, or Bronze, meaning, among other things, that they offer quality management that uses a well-considered approach. We have excluded index funds which, by their nature, own stocks that are part of an index rather than those hand-picked by a manager. Also, funds available only through financial advisors or those in institutional share classes are included.

A few things to keep in mind: Because funds report their portfolio data on different dates, some information may be more current than others. But in all cases portfolio information represents a snapshot of what the fund held at some date in the recent past and not necessarily what it holds today. Also keep in mind that more than one fund from the same fund company may own a stock. This is to be expected given that fund managers from the same shop often draw from the same research in picking stocks, and in some cases the same manager may be managing multiple funds holding the same stocks. For example,  Comcast (CMCSA) is owned by 19 different large-growth medalist funds, including six from Fidelity alone.

Also, our exercise doesn't measure the percentage of the funds' portfolios that each stock represents. For example, one stock may be owned by 10 funds but represent less than 1% of their holdings on average whereas another might be held by only five funds but represent 5% of their holdings on average. The point here isn't the extent to which the funds own a stock but rather the number of funds that have vetted the stock and found it to be a worthwhile holding.

The tables below include some interesting findings regarding the most widely held stocks among medalist funds in the large-blend, large-value, and large-growth categories. Some names on the list come as no great surprise--you'll see ample helpings of blue chips. But surprises do pop up here and there. For example, a look at the large-blend list shows many expected names, such as  Apple (AAPL),  Google (GOOG), and  ExxonMobil (XOM), which are among the largest companies in the S&P 500, but also some smaller names, such as  CVS Caremark (CVS),  Texas Instruments (TXN), and  Time Warner (TWX), which rank much further down in the index. The large-growth list also includes some surprises, including  Monsanto (MON), (CRM), and  LinkedIn (LNKD), which fall outside the list of top holdings for the Russell 1000 Growth Index.  

Meanwhile, the only stock appearing on all three lists is  Microsoft (MSFT), which serves as a reminder that funds with a growth, blend, or value bent don't necessarily stick with just one type of stock. For example, a fund with a value tilt might own Microsoft as a way to add tech-sector exposure to its portfolio even though the stock isn't selling at a deep discount.

The fact that a particular stock is widely owned by quality funds in a specific category doesn't necessarily mean it's a good buy or the right stock for you. You should pay attention to the Morningstar Rating for a given stock, which indicates how a company's current share price relates to our analyst's fair value estimate. You should also look at our fair value uncertainty rating for the stock, which indicates our analyst's level of conviction in that fair value estimate. However, finding that a stock is on at least one of these lists may offer you some level of assurance that it's considered a good holding by several quality fund managers, at least for now.

 Most Widely Held Stocks Among Large-Growth Medalist Funds
 Company # Funds Owning Russell Index Ranking * Industry Star Rating
Google (GOOG) 54 2 Internet Content & Info
Visa (V) 39 15 Credit Services (AMZN) 38 7 Specialty Retail
Apple (AAPL) 36 1 Consumer Electronics
Biogen Idec (BIIB) 35 28 Biotech
Facebook (FB) 35 17 Internet Content & Info
MasterCard (MA) 34 21 Credit Services
Monstanto (MON) 34 36 Agricultural Inputs
Gilead Sciences (GILD) 31 13 Biotech
Schlumberger (SLB) 27 14 Oil & Gas Eq. Svs (CRM) 26 60 Software-Application
Starbucks (SBUX) 26 39 Restaurants (PCLN) 25 35 Leisure
Nike (NKE) 24 42 Footwear & Accessories
Qualcomm (QCOM) 24 11 Communication Eq.
21st Century Fox (FOXA) 24 45 Media-Diversified
Union Pacific (UNP) 23 23 Railroads
LinkedIn (LNKD) 22 94 Internet Content & Info
Alexion Pharmaceuticals (ALXN) 21 71 Biotech
Amgen (AMGN) 21 22 Biotech
Costco (COST) 21 44 Discount Stores
Microsoft (MSFT) 21 3 Software-Infrastructure
Precision Castparts (PCP) 21 54 Metal Fabrication
Walt Disney (DIS) 21 75 Media-Diversified
Total number of funds: 59 (active management only)
Star Ratings as of Feb. 7
* Rank in Russell 1000 Growth Index


 Most Widely Held Stocks Among Large-Blend Medalist Funds
 Company # Funds Owning S&P 500 Ranking  Industry Star Rating
Microsoft (MSFT) 34 4 Software-Infrastructure
Wells Fargo (WFC) 28 7 Banks-Global
Google (GOOG) 24 3 Internet Content & Info
Cisco Systems (CSCO) 21 27 Communication Eq.
Johnson & Johnson (JNJ) 21 6 Drug Mfr.-Major
Apple (AAPL) 20 1 Consumer Electronics
ExxonMobil (XOM) 20 2 Oil & Gas Eq.
JPMorgan Chase (JPM) 20 9 Banks-Global
PepsiCo (PEP) 20 26 Beverages-Soft Drinks
Procter & Gamble (PG) 20 10 Household/Personal Prod.
UnitedHealth Group (UNH) 20 52 Health-Care Plans
CVS Caremark (CVS) 17 45 Pharmaceutical Retailers
Chevron (CVX) 17 8 Oil & Gas Integrated
Texas Instruments (TXN) 17 85 Semiconductors
Coca-Cola (KO) 16 18 Beverages-Soft Drinks
Qualcomm (QCOM) 16 24 Communication Eq.
Merck (MRK) 15 16 Drug Mfr.--Major
Occidental Petroleum (OXY) 15 50 Oil & Gas E&P
Philip Morris (PM) 15 23 Tobacco
Time Warner (TWX) 15 65 Media-Diversified
Total number of funds: 44 (active management only)
Star Ratings as of Feb. 7


 Most Widely Held Stocks Among Large-Value Medalist Funds
 Company # Funds Owning Russell Index Ranking * Industry Star Rating
Pfizer (PFE) 27 8 Drug Mfr.-Major
Microsoft (MSFT) 26 N/A Software-Infrastructure
JPMorgan Chase (JPM) 25 6 Banks-Global
Chevron (CVX) 24 5 Oil & Gas Integrated
Merck (MRK) 23 12 Drug Mfr.-Major
Johnson & Jonson (JNJ) 22 3 Drug Mfr.-Major
Wells Fargo (WFC) 22 4 Banks-Global
General Electric (GE) 20 2 Diversified Industrials
PNC Financial Serv. (PNC) 20 36 Banks-Regional/U.S.
Citigroup (C) 19 13 Banks-Global
AT&T (T) 18 11 Telecom Services
Cisco Systems (CSCO) 18 14 Communication Eq.
ExxonMobil (XOM) 17 1 Oil & Gas Integrated
Procter & Gamble (PG) 15 7 Household/Personal Prod.
Time Warner (TWX) 14 25 Media-Diversified
UnitedHealth Group (UNH) 14 22 Health-Care Plans
Bank of America (BAC) 13 10 Banks-Global
MetLife (MET) 13 35 Insurance-Life
Occidental Petroleum (OXY) 13 21 Oil & Gas E&P
Verizon (VZ) 13 N/A Telecom Services
Total number of funds: 36 (active management only)
Star Ratings as of Feb. 7
* Rank in Russell 1000 Value Index

Now that you've seen these lists, you might try building your own. If you don't already have a list of funds whose holdings you'd like to examine, use the  Premium Fund Screener tool or the  Morningstar Medalists fund screener tool to come up with your own list. Then build your own portfolio using the Portfolio Manager or Instant X-Ray tool (you can read more about how to do this here). Last, X-ray the portfolio and choose the (Stock) Intersection tab to see the portfolio's underlying holdings and which funds own which stocks. You might find some surprises of your own. You can also click on the Ownership tab on any stock page to learn more about which funds own it.

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