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These Funds Invest with Conviction

An investing legend gets us thinking about a straightforward concept.

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In our years of studying investors, it hasn't been lost on us that many of the best ones use concentrated, low-turnover approaches.

Exhibit A, of course, is Warren Buffett, who has generated impressive long-term returns for  Berkshire Hathaway (BRK.B) using a high-conviction strategy. Buffett is a straight shooter whose commonsense approach has delivered extraordinary results. He looks for great companies trading at fair prices that he can buy meaningful stakes in and hold for the long haul. That's about it. Buffett owns few names because he thinks overdiversification is a poor substitute for knowledge on individual firms. He also believes that great investment opportunities are few and far between, so excessive trading is dangerous. Buffett persuasively argues that it is much better to buy large positions in the few companies you understand best and then hold them indefinitely so that you can benefit from the internal compounding of a superior business.

Buffett's conviction in his picks got us thinking about funds that load up on what they like best. We screened Morningstar's database for concentrated portfolios with low turnover, and found funds using a surprisingly wide array of styles making big, long-term bets on their top holdings.

Michael Breen has a position in the following securities mentioned above: POAGX. Find out about Morningstar’s editorial policies.