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Investing Specialists

10 High-Conviction Purchases by the Ultimate Stock-Pickers

Top managers continue to exercise a lot of patience as they look for buying opportunities in a U.S. equity market that has risen close to 40% since the start of 2013.

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After increasing more than 32% during 2013, market growth slowed during the first six months of 2014, with the S&P 500 TR Index posting a 7% return for the period. Most of the market gains during the first half of the year came during the second quarter, after investors shrugged off concerns they had during the first quarter about growth and currency stability in emerging and developing markets. They also warmed back up to technology and other momentum-driven stocks, having pulled money out of these equities in droves during March and early April. It also didn't hurt to have the European Central Bank announce that it would be providing additional liquidity to struggling markets in that part of the world. That said, for most of our Ultimate Stock-Pickers there remains an undercurrent of concern about where the markets are headed from here. While investors have been willing to increase their appetite for risk over the last year or so, evidenced by the amount of capital that has flowed into equity funds overall during that time, we continue to believe that we are in the same risk aversion cycle that has persisted since the 2008-09 financial crisis, with investors gradually increasing their risk appetite during stable and expanding markets, only to pull back dramatically during market declines.

With that in mind, we found the following comments from Clyde McGregor in his second-quarter letter to shareholders of  Oakmark Equity & Income (OAKBX) of interest, particularly with regards to the notion that temperate economies can still produce extreme market volatility:

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.