10 Top Stock Picks From Top Managers: Morningstar

Morningstar often provides investors with stock picks from its analysts, from one of its indexes or from its database by using different screens. In a blog post this week, Morningstar investment specialist Susan Dziubinski lists stock ideas selected from a different source: the portfolios of the best fund managers.

These investors are actively managed funds that land in Morningstar’s U.S. large-value, U.S. large-blend or U.S. large-growth categories. At least one of each fund’s share classes earns a Morningstar medalist rating of gold with 100% analyst coverage. And the funds hold 100 or fewer stocks as of their most recently reported portfolios.

Eleven funds passed Morningstar’s screen and qualified for the firm’s list of best managers:

Best U.S. Large Value Managers

Diamond Hill Large Cap (DHLYX)
Dodge & Cox Stock (DODGX)
JPMorgan Equity Income (OIEJX)
MFS Value (MEIJX)
Oakmark (OAKMX)

Best U.S. Large Blend Managers

Hartford Stock (HSTAX)
Parnassus Core Equity (PRBLX)
Vanguard Dividend Growth (VDIGX)

Best U.S. Large Growth Managers

Loomis Sayles Growth (LSGRX)
Morgan Stanley Growth (MSEQX)
Principal Blue Chip (PGBHX)

After identifying these funds, analysts ran a Stock Intersection report in Morningstar Direct to find the 10 most popular stocks — determined by portfolio concentration and number of funds that own the stock — across all 11 fund portfolios.

Dziubinski noted that Morningstar thinks that companies with economic moats have significant advantages that allow them to successfully fend off competitors for a decade or more. In addition, the firm’s fair value estimate represents what Morningstar analysts think a particular stock is worth. Finally, Morningstar’s uncertainty rating captures the degree of uncertainty about its fair value estimate of a stock.

“When investing in companies with less certain future cash flows, investors should demand a larger margin of safety before buying that company’s stock,” Dziubinski wrote.

See the gallery for the 10 top stocks picks by Morningstar’s best investors. Dziubinski noted that this is not a “buy now” list. Many of the top picks look fairly valued or overvalued today, she writes, suggesting investors add them to a watchlist to buy on a dip.

One-year performance is as of Feb. 21.