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Funds on Warren's Wavelength

Funds that benefited the most from Berkshire's purchase of Burlington Northern, and more.

Morningstar Analysts, 11/09/2009

A lot of funds can say they invest like the Oracle of Omaha. This week Warren Buffett announced Berkshire Hathaway BRK.A was buying the 77.4% of Burlington Northern Santa Fe Corporation BNI that it didn't already own for $100 per share in cash and stock.

Click here for a look at some of the funds that benefited on Wednesday when Burlington shares shot up about 30% on news of the deal.

Obvious winners were funds that track transportation indexes, such as iShares Dow Jones Transportation Average IYT, which had 11.2% of its assets in Burlington as of Oct. 31 and advanced 5.31% on Wednesday compared with 0.24% for the S&P 500 Index.

Davis Real Estate RPFRX was an unlikely winner. What's a real estate fund doing with a large stake in a railroad company? Well, Burlington owns about 32,000 miles of rights-of-way running through more than half of the United States. This real estate is very valuable not only to Burlington but also to power and utility companies that often use it.

Hodges HDPMX could have been a winner, too. The father and son management duo of Don and Craig Hodges recently said they started buying railroad companies in 2004 because they thought the companies' increasing pricing power wasn't reflected in their share prices. Burlington is up more than 100% over the past five years while the S&P 500 is flat. Hodges sold about 40% of its stake as of Sept. 30 of this year, but the fund still increased 2.50% on Wednesday.

Fidelity Puts Analysts in Charge of More Funds
Fidelity is turning Fidelity Stock Selector FDSSX into an analyst-run fund. James Catudal, who recently took over Fidelity Growth & Income FGRIX , is out, and select fund managers Bob Lee and Ben Hesse, who lead the firm's consumer staples and financials coverage, respectively, will replace him. The fund will be sector neutral for the most part, but Chris Sharpe and Geoff Stein have the flexibility to make moderate sector bets.

This theme continues at Fidelity Small Cap Independence FDSCX. Richard Thompson remains, but he's being joined by several new managers who will each manage the fund according to their sector specialty. Fidelity rolled out this management structure for the target-date funds earlier in the year. This isn't an analyst-run fund, per se, but it's another example of Fidelity divvying up a fund by sector.

This isn't the first time Fidelity has put sector specialists in control of funds. They installed this setup a few years ago at one of Fidelity's variable annuity portfolios, though with different sector specialists. In 2008, Fidelity put the group in charge of the equity portion of Fidelity Balanced FBALX, and more recently, it was given a slice of the Freedom funds.

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