7 Stocks Top Large-Cap Managers Have Been Buying

Most of us grinned after tearing open our second-quarter account statements when they arrived in the mail (or, perhaps more likely nowadays, reviewed them online). Those of us with large equity stakes downright beamed. The U.S. stock market was up more than 9% for the first half of the year, lifting our investments along with it.

Yet despite the continued strength in stocks during the period, some value investors managed to find opportunities among large caps. Here's what three of our favorite Medalist managers purchased.

Diamond Hill Large Cap

Chuck Bath, who leads the team at Gold-rated

"Discover has significant excess capital and strong capital return capability," the managers write in their latest commentary to shareholders.

Morningstar assigns Discover a narrow moat.

"Discover's lending business, which provides most of the company's revenue, benefits from a modest cost advantage," says analyst Jim Sinegal in his latest analyst report. "The lack of a branch network makes Discover a more efficient consumer lender than many of its competitors. Furthermore, the company's underwriting has produced lower credit card loss rates than those of peers, contributing to its cost advantage."

The stock is trading in 3-star range as of this writing, suggesting shares are fairly valued today.

Bath and his team also purchased

Morningstar financial sector strategist Stephen Ellis notes that narrow-moat First Republic is indeed growing at an impressive rate.

"There are a lot of things to like about the bank and its most recent performance," writes Ellis in his latest note. "Revenue, deposits, and loans all grew at around 20% year over year. Tangible book also rose at about 16% over the prior year. First Republic's efficiency ratio currently continues to find itself within its desired bandwidth between 60% and 63% at 61.9% currently, below the upper 60s typically seen from peers. The bank’s net interest margin, currently at 3.14%, is relatively stable and has historically run at or above its peers in the low 320s (basis points)."

However, Ellis thinks current expectations for the stock are exceeding the intrinsic value of the business: shares are trading in 3-star range today.

Bath and his team also picked up shares of

"We believe the company’s recent acquisitions of SAB Miller's stake in Miller Coors will result in significant margin expansion over the next few years," they say.

Morningstar analyst Sonia Vora also argues in her latest report that the acquisition will strengthen profitability at the narrow-moat beverage-maker.

"We contend that this acquisition afforded the company with the needed scale to improve its procurement of brewing inputs, productivity at its breweries, and supply chain efficiency," she says. "Further, it cemented Molson Coors’ long-standing relationships with distributors and retailers and should allow the firm to maintain its presence on shelves and taps."

Shares are fairly valued as of this writing, trading in 3-star range.

Lastly, the team at Diamond Hill picked up shares in specialized data and analytics provider Verisk Analytics VRSK. The company serves customers in the insurance, natural resources, and financial services industries.

"We believe Verisk possesses unique data assets that allow it to provide high and recurring value to its customers and that it has a large cross-selling opportunity over the next several years," they write.

Morningstar analysts don't formally cover Verisk, but Morningstar's quantitative models indicate that shares are overvalued today.

Dodge & Cox Stock

Charles Pohl and Dana Emery, who manage the Gold-rated

"The company's long-term growth outlook is favorable given its robust new drug pipeline, particularly in oncology (cancer treatment)," say Pohl and Emery in the fund's latest shareholder report. "With a 4.3% dividend yield, the current valuation is reasonable at 17 times forward earnings and does not appear to reflect potential success from the immunotherapy drug pipeline."

Morningstar healthcare sector director Damien Conover also sees potential in Astra Zeneca's cancer drug pipeline.

"We think the company is developing several key products that hold blockbuster potential," says Conover in his latest analyst report. "In particular, the company's recently launched cancer drugs Tagrisso and Imfinzi are well-positioned based on leading efficacy in hard-to-treat cancers."

Morningstar assigns AstraZeneca a wide moat, in part because the firm's patent-protected drugs carry strong pricing power and give the company time to develop its next generation of drugs before generic competition arises. But Conover expects the firm to face short-term headwinds.

"The recent massive patent losses on gastrointestinal drug Nexium and cholesterol reducer Crestor will weigh on the company's near-term growth prospects," he says.

The stock trades in 3-star range as of this writing, suggesting shares are fairly valued.

The team at Dodge & Cox also added to their position in Anadarko Petroleum APC, an independent oil and gas exploration and production company, this year.

"The company's stock price has been negatively impacted in 2017 by a gas leak that caused a fatal explosion," they explained. "While tragic, this incident did not materially impact our long-term investment outlook for the company." They point out that the company's management has an excellent record of disciplined capital allocation, and its focus on exploration "differentiates Anadarko from its peers and will likely create value across business cycles."

Morningstar analysts don't formally cover Anadarko, but according to Morningstar's quantitative models, the company's shares are fairly valued today.

Oakmark

Bill Nygren and Kevin Grant, the skippers at Gold-rated

"Charter gives us the opportunity to invest in what we believe is a strong business with exceptional management at an attractive price," they told shareholders in the fund's latest report. They note that in many markets, Charter has the only network that can provide the high-speed Internet service that consumers demand. Moreover, they think new competitors are unlikely, due to the capital investment required for penetration. They scooped up shares when Charter's stock sagged after its first-quarter earnings report.

"Our experience investing in turnarounds reminds us that it takes more than a couple of quarters to make meaningful progress," say Nygren and Grant. "We take a more positive, longer term view of the business, and Charter is valued at a discount to peer companies."

The stock shot up more than 16% in July as rumors swirled about it merging with

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