There are a select group of mutual fund managers I really admire. It isn't just that their mutual funds have done so well over the years, but because they stick to a well-thought-out investment philosophy. So I'm always interested in what stocks they hold in their funds, as I’m always looking for good ideas.
Manager W. Whitney George of the Royce Funds has been at his job for 30 years. One of his holdings in the Royce Low-Priced Stock Fund is Corinthian Colleges (COCO), a for-profit post-secondary education company. These stocks were under pressure recently, as investors worried if the federal government would regulate them out of existence. These schools are heavily dependent on federal aid being granted to students. Fortunately, the rules handed down were much more lenient than expected. Royce holds 7% of the outstanding stock across all its funds, and I believe it sees this as a value play. The balance sheet isn't perfect, and cash flow has been inconsistent lately. I think Corinthian is a speculative play whose reward is worth the risk.
I really admire Ron Baron. His quarterly reports are always an engaging read, and his investment theses and explanations are always transparent. He holds CARBO Ceramics (CRR) in his Baron Growth Fund, and 7.76% of the shares across all his funds. His explanation says it best: "Carbo is the oil industry’s leading supplier of ceramic proppant, a key component of every hydraulic fracture job. We continue to see growing demand for fracturing as more wells drilled in North America are employing this technology. We think Carbo is expanding its product offering in a way that brings significant incremental earnings potential, and we continue to like the stock." The company's earnings are exploding, and it carries no long term debt.
The team at Dodge & Cox has an average of 26 years of experience. Consistency is the theme with this mutual fund company. The Dodge & Cox Balanced Fund holds Tyco International (TYC). The company got a lot of bad press with the whole Dennis Kozlowski debacle, but the fact was Tyco never had anything wrong with it as an operational company. The conglomerate is extremely well-diversified and produces billions in free cash flow. It trades at a reasonable P/E compared to its growth.