Want to know what the top money managers are betting on these days? Now you can, thanks to the Securities and Exchange Commission's (SEC) requirements that large holding companies and 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, the largest holding companies (and most successful) tend to invest for the long term, often realizing the potential in companies that others fail to see. A stock that has a high percentage of institutional ownership, for example, 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. Below is a list of portfolios of some of the biggest holding companies in the industry, from their legendary investors that have become household names (hint: "Buffett") to some of the most famous mutual funds in the world. For the purposes of clarity, this list has only "long" investment strategies and avoids analysis of hedge fund holdings.
- Most of the holdings listed below are household names, from technology companies to banks and consumer products.
- No matter what holdings are in a specific money manager's portfolio from year to year, no single stock makes up more than 3% or 4% of these funds.
- To apply these investing principles to your own life, stick with a broad base of stocks, bonds, and diversified funds.
Warren Buffett's Berkshire Hathaway (Various)
He really needs no introduction. Warren Buffett has been making money since before most of us were born. Even though he doesn't run a typical mutual fund, his holding company, Berkshire Hathaway, has billions of dollars invested in a portfolio of stocks. Those holdings of company shares represent one of the largest mutual funds in the world. With Buffett, investors know they 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 investing process.
Berkshire Hathaway's Top 10 Holdings (in no particular order)
Scanning through this list, you can see that Buffett generally likes the market leaders in industries like banking and consumer products. This is a good backbone for any long-term portfolio, as Buffett's market-crushing performance suggests.
Bruce Berkowitz's Fairholme Fund (FAIRX)
As the lead manager of the Fairholme Fund and once-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.
Fairholme Fund's Top 10 Holdings (in no particular order)
While Mr. Berkowitz is currently on the board of directors of the St. Joe Company, a real estate and land development company, he also has significant investments in banking and finance categories. Freddie Mac and Fannie Mae also have huge stakes in his investment portfolio, and he cushions the rest with consumer products (especially food and beverage) such as with Anheuser-Busch and Royal Caribbean cruise lines.
American Funds' The Growth Fund of America (AGTHX)
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, but although they do play a role in the overall investment process, the focus is more on companies devoting their capital to grow revenues and earnings.
Growth Fund of America's Top 10 Holdings (in no particular order)
This fund's search for long-term growth (in the large-cap category) has led it to bets on tech leaders like Facebook, Amazon, and Google. In fact, over a quarter of its total net assets lie in the technology sector, followed by consumer services, healthcare, and financials.
Fidelity Contrafund (FCNTX)
The Fidelity brand is one of the most recognizable in all of finance, and its Contrafund seeks to find companies that are "unloved" by mainstream investors or whose value has not been appropriately assessed by Wall Street. The five-star fund boasts over $134 billion in assets, making it one of the biggest holding companies, and has closely followed if not beaten the S&P 500 in the past five years.
Fidelity Contrafund's Top 10 Holdings (in no particular order)
By now, you'll notice how Buffett's Berkshire Hathaway fund shows up on several lists. It seems that even experts at picking individual stocks aren't above investing in another individual's holding companies that they trust and respect. The Contrafund also leans heavily on tech stocks, especially more established institutions like Facebook, Microsoft, and Adobe, among others.
Dodge & Cox Stock Fund (DODGX)
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.
Dodge & Cox Stock Fund Top 10 Holdings (in no particular order)
With the exception of Alphabet and Microsoft, tech stocks are noticeably sparse in this holding company's list. Instead, the managers of Dodge & Cox are focusing on telecommunications companies such as Charter and Comcast, along with a healthy dose of financial services and banks such as Capital One, Charles Schwab, and Bank of America.
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 the companies in these holding companies' portfolios. It's even 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. Chances are, if they are successful enough to be known, their financials will reflect it, too.
The Bottom Line
Armed with real data from the holdings of the world's largest holding companies, any investor can begin to build their own investment portfolios. Add your own experience and unique perspective, and you're well on your way to constructing a profitable portfolio that's not a burden to maintain, but fun to build and watch it grow.