10 Stocks Boosting Little Funds to Big Returns (Update2)
BOSTON ( TheStreet) -- There are a handful of small, actively managed mutual funds holding little more than a dozen or so stocks boasting returns north of 22% this year, or more than double the return of the benchmark S&P 500 Index .
Their secret? Old-fashioned stock picking of lesser-known or undervalued companies.
Take, for example, the $20 million Biondo Focus Investor Fund (BFONX) . It's up 37% this year, with a portfolio made up of 13 stocks.
Biondo Focus has a couple of well-known large-caps carrying the load, including everybody's favorite pick, iPhone and iPad maker Apple(AAPL) , and the turnaround stock of the year, Bank of America (BAC) . It also has some under-the-radar stocks. Its latest addition is Nuance Communications (NUAN) , a maker of speech-recognition software.
Then there's the $36 million Berkshire Focus Fund (BFOCX) , up 25% this year. It, too, has big gains on large-cap stocks such as Apple and Internet travel site Priceline.com(PCLN) . The fund initiated new positions in CommVault Systems (CVLT) , Rackspace Hosting (RAX) and Zynga(ZNGA) in the past quarter or so. Those stocks posted double-digit returns this year (and are discussed in detail below).
Once-revered fund manager Bill Miller's $1 billion Legg Mason Capital Management Opportunity Fund (LMOPX ) , up 25% this year after losing 35% in 2011, started stakes in NXP Semiconductor (NXPI) and E*Trade Financial (ETFC) , which have performed strongly this year.
But small-cap stocks aren't the only focus of smaller funds. With a tilt toward large-caps, the $130 million SunAmerica Focused Growth Fund ( SSAAX ) , up 21% this year, made a big bet on the biopharmaceutical drug firm Celgene(CELG) late last year. It also initiated a stake in online broker Charles Schwab (SCHW) .
I screened the Morningstar database for small, actively managed equity funds with returns of at least 20% this year to find some of their newest, top-performing stocks. (Note that the average domestic stock fund is up 12.1%, on average, in 2012.)
Here are summaries of 10 stocks that those funds are buying in inverse order of returns this year:
10. Nuance Communications (NUAN)
Company profile: Nuance, with a market value of $8 billion, makes speech-recognition software for use in automated call centers, mobile phones, global positioning systems, and personal computers. Early this month, it announced the planned purchase of the medical transcription company Transcend Services, which will boost its presence in the health care business.
Investor takeaway: Its shares are up 3.7% this year and have a three-year, average annual return of 41%. Analysts give its shares 13 "buy" ratings, two "buy/holds," three "holds," and one "sell," according to a survey of analysts by S&P. It's expected to earn $1.56 per share this year and earnings will grow 13% next year.