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Investing Specialists

Six Financial Stocks One Ultimate Stock-Picker Is Buying

Bruce Berkowitz has been aggressively buying financials for his Fairholme fund.

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By Vishnu Lekraj | Stock Analyst

As you may recall from previous articles, we firmly believe that portfolio managers send signals about how they feel about a particular stock by the amount of money they're willing to commit to it at any given time. This is why we focus on not only the holdings of our Ultimate Stock-Pickers, but also on their purchases and sales. We generally assess the relative attractiveness of an individual security by how many funds are currently holding it, the percentage that each stock makes up of each manager's portfolio, and whether or not our Ultimate Stock-Pickers have been adding to or subtracting from their positions. However, we also like to look at new money purchases and outright sales, which we feel offer additional insight into the thinking of our top managers about their holdings.

Aside from the individual holdings of our top managers, we also pay attention to the sector allocations being made by our Ultimate Stock-Pickers, both in the aggregate and on a case by case basis, as they tend to provide us with an indication of where our top managers have placed their biggest bets relative to both the broader market (as represented by the S&P 500 Index (SPX)) and their peers. We hinted at some of this in our last article, when we noted that five of the six best performing fund managers among our Ultimate Stock-Pickers over the last year--a list that included  Yacktman (YACKX),  Fairholme (FAIRX),  Columbia Value & Restructuring (EVRAX),  Dodge & Cox Stock (DODGX),  Hartford Capital Appreciation (ITHAX), and  Oak Value (OAKVX)--had made only slight adjustments to their sector allocations. This isn't too surprising, given that most managers avoid tinkering too much with their portfolios when things are going right.

The Morningstar Ultimate Stock-Pickers Team does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.