Want to know what the top money managers are betting on these days? Well you can, thanks to the Securities and Exchange Commission's (SEC) requirements that large professional investors report periodically on their holdings. While a consensus pick - even from the best and brightest - doesn't guarantee market-beating success, it does come with some perks.
For one, large investors like these tend to invest for the long term, often realizing potential in companies which others fail to see. A stock that has a high percentage of institutional ownership tends to reflect intense professional research.
While there's no foolproof method or formula to deciding who the best money managers are, votes in the form of investor dollars speak volumes. Here is a list from legends with household names (hint: "Buffett"), recent award winners like Bruce Berkowitz, and some of the largest mutual funds in the world. For the purposes of clarity, this list has only "long" investment strategies and avoids analysis of hedge fund holdings.
Top Money Manager: Warren Buffett
He really needs no introduction - the guy's been making money since before most of you were born. Even though he doesn't run a typical mutual fund, his holding company, Berkshire Hathaway, has billions invested in a portfolio of stocks. Those holdings of company shares would represent one of the largest mutual funds in the world. With Buffett you get the added benefit of his knowledgeable, outright purchases of companies, his in depth dialogues with investors and the general peeks into his brain and process.
Top 10 Holdings (in no particular order, as of 12/31/09)
Scanning through this list you can see that Buffett generally likes the market leaders in industries like banking, consumer products and energy. This is a good backbone for any long-term portfolio, as Buffett's market-crushing performance suggests. (They don't call him "The Oracle" for nothing. Learn how Buffett comes up with his winning picks in Think Like Warren Buffett.)
Top Money Manager: Bruce Berkowitz
Lead manager of the Fairholme Fund, and recently-named domestic stock fund manager of the decade by Morningstar, Mr. Berkowitz considers himself a disciple of the Buffett style of investing, looking for deep values and wide margins of safety when picking stocks.
Top 10 Holdings
Mr. Berkowitz is currently betting on a consumer recovery as it relates to travel (Hertz), credit (Americredit, Citigroup), and commercial real estate (General Growth Properties, St. Joe). His positions suggest that he feels concerns over healthcare reform are overblown, as evidenced by big bets on insurers like Humana and WellPoint.
Top Money Manager: American Funds' "Growth Fund of America"
This is the largest domestic fund in America, so the name appears justified for this giant. The fund is run by a team of seasoned managers, and looks to provide consistent growth of capital. Dividends and income are secondary concerns although they do play a role in the overall investment process, but the focus is more on companies devoting their capital to growing revenues and earnings.
Top 10 Holdings
This fund's search for growth has led it to bets on tech leaders like Microsoft, Google, Oracle, Cisco and Apple.
Top Money Manager: Fidelity Contrafund
The Fidelity brand is one of the most recognizable in all of finance, and their Contrafund seeks to find companies that are "unloved" by mainstream investors or whose value is has not been appropriately assessed by Wall Street. The five-star fund boasts over $50 billion in assets and has beaten the S&P 500 by just under 4% over the past 10 years.
Top 10 Holdings
Notice how Buffett's Berkshire Hathaway shows up on several lists. It seems that even experts at picking individual stocks aren't above investing in another individual they trust and respect. The Contrafund is also high on tech stocks and financials with good growth prospects like Visa and Wells Fargo. Gilead Sciences and Noble Energy are bets on fast-growing companies in the biotech and energy services space, respectively.
Top Money Manager: Dodge & Cox Stock Fund
This perennial all-star fund has been around since 1965, steadily earning solid returns and gaining new assets. Income is a secondary consideration to solid growth in its stock investments, and the low annual turnover of 18% shows that the management team aims to stick around for the long haul.
Top 10 Holdings
With the exception of Hewlett-Packard, tech stocks are noticeably sparse in this list. Instead the managers are focusing on energy (Schlumberger), pharmaceuticals (Novartis, Merck, Glaxo), and media (Comcast, News Corp.)
Common Traits & Threads
In general, no single stock makes up more than 3 or 4% of these funds, no matter how much the managers may love the stock. This principle is what diversification is all about, and you should be sure to follow it in your own investment life. No matter how great a company is, there are risks out there that could cause the stock to drop suddenly or take much longer to reach its potential than you had hoped for.
Stick with a broad base of stocks, bonds and diversified funds. The important thing is to be invested - be a participant in the game and not just a spectator.
You've also probably heard of most of these companies. It's ever more proof that you don't have to invest in some strange entity you've never heard of to make money. Research and learn about the companies you love and the products and services you use in your everyday life.
The Bottom Line
Armed with real data and your own experience and unique perspective, you're well on your way to constructing a profitable portfolio that's not a burden to maintain, but fun to create and follow.