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Investing Specialists

Our Ultimate Stock-Pickers' Top 10 New Money Purchases

Even with the rally in the markets, we found a few stocks worth considering.

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By Brett Horn | Associate Director of Equity Research

As many of you may recall, aside from looking at the top holdings, purchases and sales of our Ultimate Stock-Pickers, we also like to dig a little deeper into the purchases that our top managers have been making, honing in on both high-conviction purchases and new money buys. We believe that looking at new money purchases give us the most insight into what our Ultimate Stock-Pickers think are the most attractive buying opportunities right now, as managers typically put money to work in new names only when their purchase decision carries a very high degree of conviction. That's not to say that managers do not make high-conviction additions to their existing holdings. They do, and we track them with the same intensity as we do with new money purchases. It's just that we believe that it is far easier for managers to put money to work in holdings that they are already comfortable with than it is for them to make a bet on a new name.

With about three quarters of our Ultimate Stock-Pickers having reported their third-quarter holdings, we've been able to glean some of the higher-conviction new money purchases that were made by a fair number of our top managers during the most recent period. When looking at these new money purchases, it pays to remember that the stock buys we are looking at were made during a prior period, so the prices managers paid for these securities are likely to be different from where they are trading today. This is particularly relevant right now, given the run-up we've seen in the markets over the last couple of months. With the S&P 500 Index gaining nearly 4% in value since the end of the third quarter, and up about 14% from the low point reached during the third quarter, our top managers were likely putting money to work at much more attractive prices than investors can realize today.

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.