"Golf has Tiger Woods, novelists have Tom Clancy, and the investment community has stars such as Bruce Berkowitz, Bill Nygren, Charlie Dreifus, and Mario Gabelli," states Paul Tracy.
In his The Street Authority Market Advisor he suggests, "These money managers are at the pinnacle of their craft." Here, he takes a look at these "celebrities" and some of their current top stock holdings.
"These money managers have all amassed prodigious gains over the years for their shareholders.
"Over the past few months, these gurus have come out with ringing endorsements for certain stocks. This isn't empty talk -- they are putting their money where their mouth is.
"Thanks to regulatory filings, interviews and shareholder reports, we can look over their shoulders and see where these elite investors are currently finding the most promising opportunities.
"Bruce Berkowitz is the lead manager of the Fairholme Fund, which has delivered a cumulative gain of 150% since inception 9 years ago. By comparison, the S&P 500 has backtracked -28% over the same time frame.
"When asked recently to name the one key metric that he uses to evaluate investments, Berkowitz didn't hesitate to say 'it's all about the amount of cash a company generates that can be passed to owners in relationship to the price.'
"Lately, he has plowed more than 50% of his fund's assets into health-care (particularly big pharma), aerospace and defense.
"His rationale is that there is ultimately nothing more important than the health and well-being of our families, and defense and health-care spending eat up a large percentage of the federal budget.
"His largest portfolio holding is Pfizer (NYSE: PFE), and recent buys include Boeing (NYSE: BA), General Dynamics (NYSE: GD), and Northrop Grumman (NYSE: NOC).
"Bill Nygren is lead portfolio manager of the Oakmark Fund, which has racked up double-digit annualized gains for the past 18 years. Nygren is confident that, over time, undervalued stock prices will always rise to reflect the value of the underlying company.
"In general, he prizes excess cash flows and relies on discounted cash flow (DCF) modeling for valuation -- buying stocks trading below 60% of fair value and then selling once they reach 90%. Nygren runs highly concentrated portfolios, so only his best ideas make the cut.
"Several stocks have passed his meticulous screening process lately, including Illinois Tool Works (NYSE: ITW), Texas Instruments (NYSE: TI) and advertising giant Omnicom (NYSE: OMC). But perhaps most noteworthy is a new stake in Microsoft (NASDAQ: MSFT).
"Nygren explains that Microsoft has always been an excellent company, but this is the first time that it has slipped into value territory. Back in 1999, the firm churned out profits of $0.70 per share and the stock peaked above $60.
"Today, it earns more than twice that much and there are fewer shares outstanding, yet they trade at less than one-third the price. In addition, Microsoft has over $20 billion in cash and offers a yield above the 10-year Treasury.
"There's a good reason why Charlie Dreifus was just selected Morningstar's 'Domestic Stock Fund Manager of the Year.' He captured that prestigious award by losing less than -20% in a year when many other small-cap stock funds lost more than -40%.
"During the last bear market from 2000-2002, his shareholders enjoyed a +53% gain, while the Russell 2000 sank -41%. What would you expect from an investor who refers to margin of safety as "the central concept in investing."
"Dreifus avoids flashy 'growth-story' stocks and sticks to boring companies with unassailable balance sheets and lofty returns on capital -- not unlike Warren Buffet.
"Dreifus is drawn to cash-rich companies that are trading for less than liquidation value. And he fishes in the micro/small-cap waters, where such bargains are more plentiful.
"Lately, Dreifus has been focusing his efforts on consumer-oriented stocks like children's apparel retailer Gymboree (Nasdaq: GYMB).
"Mario Gabelli is yet another Buffett disciple whose value roots can be traced back to Ben Graham. He employs many of the same research-driven tactics -- from dissecting a company's filings to interviewing its managers.
"Gabelli has developed a proprietary methodology that evaluates the real-world value of a company's balance sheet assets and future cash flow stream to determine its 'Private Market Value' (PMV).
"Since the inception of his flagship Gabelli Value Fund in 1989, this approach has quadrupled a $10,000 investment into more than $45,000 today (or roughly $80,000 before this selloff.)
"And thanks to a recent Barron's Roundtable discussion, we know exactly what his sights are set on now.
"Gabelli points out that there are 240 million cars on the road, many of which have been in service longer than six years (the point that repairs and maintenance become inevitable).
"Because consumers are holding off on new vehicle purchases right now, auto parts distributors like O'Reilly Automotive (NASDAQ: ORLY) are looking interesting.
"Elsewhere, he likes Dr. Pepper Snapple Group (NYSE: DPS), which churns out frothy cash flows and could be a buyout candidate.
"Maine & Maritimes (NYSE: MAM) is another favorite. The electricity transmission/distribution company stands to benefit from investments in green power, and a new line carrying wind-generated electricity to the New England power grid will put a charge in earnings."
