A whole host of talented individuals are hunting for quality companies trading at attractive valuations, we reveal the recent buys of the cream of the crop

Ultimate Stock-Pickers is a concept we’ve developed at Morningstar with one simple goal: to cross check our stock research against the opinions of professional money managers. While the stock analysts at Morningstar spend the majority of their time hunting for quality companies trading at attractive valuations, we would be remiss if we failed to acknowledge the fact that a whole host of individuals outside of Morningstar are engaged in the very same effort. So why not take advantage of the fruits of their labour and in the process highlight many of the gems that exist from time to time within our own universe of 5-Star stocks? We focus on both high-conviction purchases and new-money buys when looking at the trading activity of our Ultimate Stock-Pickers. We think of high-conviction purchases as instances where managers make meaningful additions to their existing holdings (or make significant new-money purchases), focusing on the impact that these transactions will have on the portfolio overall.

top 10 high conviction purchases from ultimate august 2014

Most of the market gains during the first half of this year came during the second quarter, after investors shrugged off concerns they had during the first quarter about growth and currency stability in emerging and developing markets. They also warmed back up to technology and other momentum-driven stocks, having pulled money out of these equities in droves during March and early April. It also didn’t hurt to have the European Central Bank announce that it would be providing additional liquidity to struggling markets in that part of the world.

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top 10 new money buys august 2014

That said, for most of our Ultimate Stock-Pickers there remains an undercurrent of concern about where the markets are headed from here. While investors have been willing to increase their appetite for risk over the last year or so, evidenced by the amount of capital that has flowed into equity funds overall during that time, we continue to believe that we are in the same risk aversion cycle that has persisted since the 2008-09 financial crisis, with investors gradually increasing their risk appetite during stable and expanding markets, only to pull back dramatically during market declines.

Source: Morningstar / Greggory Warren, CFA

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