Looking for stock ideas? Mutual funds are a great
resource. Fund managers spend their days finding worthwhile stocks
to add to their portfolios, and the SEC requires them to report
their portfolio holdings every three months. Even better,
Morningstar reports fund holdings in a useful format that tracks
changes in each fund’s holdings compared to its previous report. To
see the data, start at Morningstar’s home page (www.morningstar.com),
enter your fund’s ticker in the quote box, select Portfolio, and
Of course, not all mutual funds are equal. In fact,
only one in three funds focusing on U.S.-based stocks managed to
beat the S&P 500 over the last three years. Also, since the average
fund changes almost half of its portfolio annually, the timeliness
of the portfolio data is important.
Finding Funds to Spy on
Thus, Morningstar’s portfolio data is most useful if you focus on
funds that turn over their portfolios relatively infrequently and
report their holdings relatively close to the end of each reporting
Since Morningstar tracks thousands of funds, how do you pick which
ones to check? In my view, your best resources are funds with
reasonably strong track records that are hot, meaning that they are
currently outperforming the market by a substantial margin. Finally,
since the U.S. economy is still the world’s strongest, it’s best to
stick with funds mainly holding U.S.-based stocks.
Mutual Fund Screener
With all that in mind, I used Morningstar’s Premium Mutual Fund
Screener to find U.S. stock funds that had returned at least 23%
over the past 12-months (25% better than the S&P 500) and at least
13% on average, annually (15% over the S&P), over the past three
To improve the chances of seeing current data, I specified 30%
maximum annual portfolio turnover, meaning that, on average, the
fund changes 30% of its holdings in a year. I also ruled out
holdings reports filed prior to December 31, 2016. Hopefully, that
requirement, would limit my list to funds that had already taken the
presidential election results into account.
Along those same lines, when analyzing fund portfolios, although
total holdings are significant, I first look at each fund’s recent
trades. Here’s what I gleaned from check Morningstar’s portfolio
reports for the three funds turned up by my screen.
Thrivent Mid Cap Stock A (AASCX)
I listed Thrivent first because its 21% annual turnover was the
lowest of the bunch. Thrivent has returned 35 percent over the past
12-months and 13 percent, on average, annually over three years.
Interestingly, Thrivent was the only fund that didn’t add to its
holdings during its December 2016 quarter. Instead, in its only two
trades, Thrivent unloaded 64% of its NVIDIA (NVDA) holdings, and
lightened its position in Oshkosh Corporation (OSK) by 15%. It’s
biggest holdings at December 31 were two banks, Zions Bancorp (ZION)
and Huntington Bancshares (HBAN), along with Southwest Airlines (LUV).
Capital Partners Institutional (CLIFX)
Holding mostly large-cap, value-priced stocks, Clifford returned 28%
over the past year and averaged a 13% three-year average annual
return. Although only historically turning its portfolio 24%
annually, Clifford was a big buyer recently, establishing new
positions in Diebold (DBD) and Teva Pharmaceutical (TEVA), and
doubling its holdings of Dun & Bradstreet (DNB) and Stericycle (SRCL).
Surprisingly, Clifford didn’t sell any of its holdings in the
quarter. At December 31, its biggest holdings were American Express
(AXP), CIT Group (CIT), and Evertec (EVTC).
Small-Cap Sustainable Growth (PSGAX)
Virtus, which holds a concentrated portfolio of 26 growth-priced
small- and mid-cap stocks, returned 27% over the past 12-months and
averaged 13% annually over the past three years. Its annual
portfolio turnover is 26%. Virtus significantly added to positions
in Abaxis (ABAX), Copart (CPRT) and MarketAxess Holdings (MKTX), and
severely cut its UFP Technologies’ (UFPT)holdings. Its biggest
holdings were Shutterstock (SSTK), Ollie’s Bargain Outlet (OLLI),
and Fox Factory Holding (FOXF).
Free Mutual Fund Screener
Although I used Morningstar’s Premium screener, you could accomplish
more or less the same thing using its free Basic Fund Screener. For
instance, you could screen for Morningstar Five-Star rated U.S.
equity funds that have returned at least 25% over the past year, and
with 25% maximum turnover ratios. Rule out any index funds that turn
up in your results because, by definition, they track fixed indices.
You could run such a screen anytime you need new stock ideas.
As always, consider the stocks mentioned here as research
candidates, not a buy list. The more you know about your stocks, the
better your results.