A complete guide to the world’s best stock pickers, their mutual fund strategies, and their most lucrative bets

Bill Miller
  • Investors globally have put trillions of dollars into mutual funds.
  • Fund managers have a huge range of approaches and specializations that any investor can learn from.
  • Growth investors aggressively seek big returns while value managers want startlingly cheap stocks.
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  • See more stories on Insider’s business page.

Mutual funds have been around for more than a century, and US investors alone have tens of trillions of dollars of their money invested in them as they aim to build wealth and save for long-term goals like retirement.

That might make the industry sound a little buttoned-down or sedate, but there are countless funds and an enormous number of philosophies, styles, and attitudes as well as areas of specialization.

The overwhelming trend in the industry in recent years has been toward passive investing, or funds that automatically track a particular stock index or group of stocks. Passive funds have become a larger and larger part of the industry because they can provide broad exposure and because their simple setup translates into much lower fees for investors. In many cases, those savings on fees can cancel out a notable gap in performance.

But even investors who prefer to stick to the passive style can learn from people who’ve reached the top of the game. Here’s a walk through the approaches, ideas, and portfolios (at the time of publication) of some of the most successful and famous mutual fund managers.

Growth funds

Perhaps the flashiest and most popular type of actively managed fund, growth managers are focused on increasing the value of the money that’s been invested with them by picking companies that are going to beat the market and achieve faster growth than their peers – the kind that can make a great stock shoot up dramatically.

Growth investors were big winners in the 2010s bull market, and when they build up a good track record they become very popular as market oracles.

Some of the most famous growth managers of the day are Cathie Wood of Ark Invest, Dennis Lynch of Morgan Stanley, and Ron Baron of Baron Funds.

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Alex Umansky has been one of the world’s best stock pickers for years, and his fund is making 6 times more than the competition in 2020. He told us the 4 pillars to his investing approach.

Value funds

Value investing can be a world of contrarians and characters. Fund managers who invest with a value approach try to find companies that are measurably cheaper than they should be based on hard metrics like price-to-earnings or sales ratios. An opinionated bunch, they believe the rest of Wall Street is dead wrong a lot of the time.

That style has performed well in the past and has been on a strong run since late 2020, but growth investing was far more successful in the last bull market. Some experts think that in a high-tech and low-interest rate world, the times have passed value investing by. Value investors disagree, both for professional reasons and because disagreeing is what they do.

The most famous value fund managers working today include Bill Miller of Miller Value Partners, David Herro of Harris Associates, and Ariel Investments’ John Rogers.

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The managers of a high-flying value fund that’s crushing the market and beating 99% of its competition this year told us how they’re doing it – and the vital role that betting against stocks plays in their process

Paul Ehrlichman has been one of the world’s best stock pickers in the past year. He told us how he built his portfolio, where he’s invested today, and what he thinks it will look like a year from now.

A manager of the No. 1 stock fund over the past 20 years attributes his success to a contrarian approach. He shares his 3 most surprising calls, including why he prefers Samsung to Apple.


Bond funds often get less attention than stock funds because they tend to prioritize protecting investors’ money and providing stable, reliable returns above making the most money possible. And returns for a lot of kinds of bonds have been ultra-low since the Global Financial Crisis in 2008-09.

But even in a low-bond yield environment, bond funds are heavily relied on by people who are retired or near retirement. They’re crucial to pensions, university endowments, and governments. And they’re considered valuable sources of perspective because of the enormous amount of factors bond investors have to evaluate.

Long time pros like Rick Rieder of BlackRock and Gibson Smith, formerly of Janus Henderson and now of Smith Capital Investors, can move markets, help protect and diversify investors’ money, and inform their approaches.

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Bond pro Gibson Smith managed tens of billions of dollars for Janus Henderson before launching his own firm. He told us why the fixed income market is too bearish on the recovery – and 3 investments he likes today.

Hybrids and alternatives

While the growth vs. value argument gets a lot of ink and can be entertaining, there’s no rule saying you can only invest one way or the other. Successful fund managers like Brian Barish say they’ve updated or combined the two approaches to get the best of both worlds. And there are lots of ways to win at being a contrarian.

And there’s far more to invest in than just stocks. There are funds that combine stocks, bonds, and other assets like debts, physical commodities like oil and gold, and funds that switch between approaches as market conditions change.

Some alternative funds emphasize diversification and giving investors exposure to assets other than stocks and bonds so they don’t depend entirely on them. Others are hedges intended to protect investors from unusual events or specially scary risks.

Given the enormous popularity and familiarity of mutual funds, it’s no surprise that there’s now also a mutual fund that invests in bitcoin.

Read more:

Brian Barish’s fund has returned 720% to investors over 2 decades by combining the best of growth and value stock-picking. He detailed for us 4 of his highest-conviction bets for the future.

Dave King has been one of the world’s best fund managers for 10 years thanks to a creative, go-anywhere approach. He told us how investors can replicate his safe strategies for finding yields as the bond market gives them almost nothing.

2 commodities experts told us this is one of the most exciting environments they’ve seen in 40 years of investing. Here’s why they’re upbeat, and what they’re buying to profit from it.

The first bitcoin mutual fund is now trading. The top investment strategist behind it breaks down its novel approach to gaining safer crypto exposure without the hassle of buying coins directly.

Broadened horizons

Just as fund managers can specialize by investing style or asset class, they can also specialize based on geography or company size, as different parts of the world often feature different types of companies – with more manufacturing and financials in Europe than the US, and more tech manufacturing in Asia, for example.

Emerging markets and older ones also have different profiles.

Meanwhile, companies of different valuations can be in very different parts of their life cycles.

Smaller companies are generally higher risk, but those that succeed and take off can provide dramatic returns, and managers in that space devote a lot of time to figuring out which ones will really thrive. Large companies can deliver more sustainable performance as well as bigger returns from dividends and stock repurchases.

Companies with middle-sized market caps can be somewhat forgotten in the large vs. small discussion, but mid-cap fund managers say they can provide diversification and be a “best of both worlds” type of investment because they’re less risky than small caps but grow faster than most large caps.

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Fund manager Aram Green has been delivering returns of 30% a year to investors for 5 years. He told us 3 stocks he bought would thrive in a post-recovery market and how he’s revitalizing a struggling long-term strategy.

Read the original article on Business Insider

Inflation fears are stoking volatility in stocks but they’re unlikely to derail the market rally, says UBS

NYSE traders
  • A jump in US inflation will stoke bouts of volatility in the stock market but it’s not likely to stop the overall rally, says UBS.
  • Consumer price inflation for April soared by more than expected, to a rate of 4.2%.
  • “We think that the reflation trade has further to run, UBS said Thursday.
  • See more stories on Insider’s business page.

US inflation rates are flying up and worries about an acceleration in prices ranging from airline tickets to energy have knocked stocks off their record highs, but those fears are unlikely to derail the overall rally in equities, wealth manager UBS said Thursday.

The “latest volatility does not come as a surprise. But we also don’t see it as signaling an end to the bull market,” Mark Haefele, chief investment officer of global wealth management at UBS, wrote to clients.

The arrival of April’s Consumer Price Index confirmed months of caution from economists who said stronger inflation was on the way, a reflection of ongoing economic recovery from the COVID-19 pandemic. The higher-than-expected headline and core inflation readings drove stocks sharply lower Wednesday.

Market pricing of the inflation outlook also stepped higher, said UBS, noting the US 10-year breakeven rate moved to imply an average inflation rate of 2.56%, close to the highest level since 2013 and up from 2% when 2021 got underway.

The CPI data triggered Wednesday’s selloff in stocks that left the S&P 500, the Nasdaq Composite, and the Dow Jones Industrial Average each down by at least 2%, with the Dow industrials tumbling 682 points.

“The latest rise in inflation, in our view, reflects year-over-year comparisons, which will fade,” he said. “While raw material prices may climb further, we believe the bulk of the rise in commodity prices is now over. In addition, labor supply headwinds should ease in the next few months once schools fully reopen, vaccinations continue to rise, and supplemental unemployment benefits expire.”

The CPI jumped to 4.2% from a year earlier, the largest increase since 2008, and core inflation, which strips out volatile energy and food prices, surged 0.9%, the largest one-month climb since 1982.

The UBS wealth management chief said it was important to note that major central banks have indicated they will not tighten policy in response to a temporary increase in prices. He outpointed that Federal Reserve Governor Lael Brainard said Tuesday the Fed will be “patient” as an inflation surge looks transitory.

“As inflation uncertainty persists, and as economic reopening remains on track, we think that the reflation trade has further to run. Our preferences include small-caps, financials, energy stocks, commodities, and emerging markets,” said Haefele.

Investors on Thursday appeared to set aside inflation worries, with Wall Street’s key stock indexes riding up roughly 1% each after weekly jobless claims hit another pandemic-era low.

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The 10-year Treasury yield has jumped to its highest in 14 months, cutting further into gains for growth stocks

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Federal Reserve Chairman Jerome Powell.

  • Borrowing costs are rising as implied by the benchmark 10-year Treasury yield, which hit its highest since January 2020.
  • Tech stocks fell as the yield pushed past 1.6%, drawing the Nasdaq Composite down 1% during Wednesday’s trading session.
  • The Fed would likely spring into action if the 10-year yield were to hit 2% by the end of March, says one analyst.
  • See more stories on Insider’s business page.

Borrowing costs as tracked by the 10-year Treasury note yield rose to their highest in 14 months on Wednesday, with investors pricing in expectations of hotter inflation while they cut down high-flying growth stocks.

The yield on the benchmark 10-year Treasury note hit 1.67%, a level not seen since mid-January 2020, before the COVID-19 outbreak was declared a pandemic and before it had accelerated in the US. Yields rise as bond prices drop.

The yield has quickly pushed higher since the start of 2021, from around 0.9%, bolstered by improvement in the world’s largest economy after it and other economies worldwide fell into recession last year.

“What the market is trying to price in is a much more optimistic Fed … that is likely to remain committed to providing more accommodation into this economic recovery,” Ed Moya, senior market analyst at Oanda, told Insider on Wednesday before the release of the Federal Reserve’s economic projections and monetary policy decision at 2 p.m. Eastern.

Along with growth, investors also expect inflation to increase and for the Fed to begin raising interest rates after they slashed them to near zero in March 2020 in response to the health crisis.

The step-up in the 10-year yield, which is tied to a range of lending programs including mortgages, has spurred a pullback in growth stocks, notably large-cap tech stocks, and a rotation into cyclical stocks set to benefit when an economy improves.

Those moves showed up Wednesday with the tech-concentrated Nasdaq Composite falling by 1.1% and the S&P 500‘s information technology sector losing 1.3%. Shares of Apple dropped by 2.2%, Google’s parent company Alphabet declined 1.7% and Microsoft gave up 0.8%.

“You’re probably going to see that the Fed is still going to be stubborn as far as when that first rate hike is going to happen, but the markets are just going to go ahead and price that in a lot sooner,” said Moya.

There are market expectations that the Fed will begin raising its fed funds target rate in 2023 from the current range of zero to 0.25%. Meanwhile, more fund managers now consider higher-than-expected inflation would be the biggest danger to the market, replacing COVID-19 as the main risk, according to a Bank of America survey for March.

The US economy is expected to recover further with the US government circulating COVID-19 vaccines from three companies — Pfizer and its partner BioNTech, Moderna, and Johnson & Johnson — and with about 111 million people already vaccinated.

“Also, it doesn’t hurt when you have almost $2 trillion in [fiscal] stimulus get done since your last policy meeting,” said Moya, adding that “the economy is likely to run hot for a little bit.”

A steady grind higher of the 10-year yield “is completely healthy,” said Moya.

“But if this pace continues [and] by the end of the month we’re above 2%, that is going to be somewhat disruptive to the economic recovery,” which would likely prompt the Fed to take action, he said. The Fed’s tools include buying more Treasury bonds, he added.

Read the original article on Business Insider

The post-pandemic economy will see a new class of growth stocks emerge, Fundstrat’s Tom Lee says

Thanksgiving airport coronavirus
Travelers wearing protective face masks walking through Concourse D at the Miami International Airport on Sunday, November 22, 2020 in Miami, Florida.

As the economy climbs out of the pandemic, a new class of stocks could emerge as investors’ go-to for growth: cyclical stocks.

That’s according to Tom Lee, who is anticipating that after a year where growth was dominated by technology and stay-at-home plays, stocks that hinge on an economic recovery have the most upside in 2021.

The Fundstrat head of research said that in 2021, Americans will shift away from their “digital life” and back to an “analog life.” While the COVID-19 pandemic was similar to a wartime economy, 2021 will be a post-war period, with a focus on rebuilding, and the stimulus bill approved by the House on Wednesday will further solidify these changes, Lee said.

Businesses will reopen, US households will receive substantial relief from the incoming stimulus package, and infrastructure spending will increase.

All of these changes will likely change the “psychology of investors,” Lee explained. If theme parks are booming, no one will want to buy Netflix, and if people are taking their first trip in a year, they won’t be thinking about buying Zoom.

In the post-pandemic economy, cyclical stocks, those that gain when the economy expands, will be the new “growth stocks.”

“After any war, cyclical companies become growth companies as economies are rebuilt. This is why cyclicals, in our view, are taking leadership,” said Lee.

Lee introduced a “Power Epicenter Trifecta” list to identify the cyclical stocks with the strongest price appreciation potential.

Some names on the list include travel stocks Norwegian Cruise Lines and Royal Caribbean, Delta Airlines, energy stocks like Exxon Mobil and Schlumberger, and even office REITs Boston Properties Inc and Highwoods Properties Inc.

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