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Xstrata, Dell, Amdocs Top Masters' Thesis

"The investment in Xstrata reflects our strong belief that mining, in general, is an attractive industry because it is a massively concentrated industry and the best assets have cash costs that are significantly below the marginal player's cash cost, and therefore the industry leaders can maintain high profit margins as prices tend to converge to the marginal producers' higher costs.

"In many commodities, especially copper, there is limited new supply and it takes 10 years and several billion dollars to develop a new significant mine. Finally, and most importantly, China's fast-growing, commodity-intensive economy is short mining commodities, meaning there is strong growth and good visibility for demand in a sustainably undersupplied market.

"The financial crisis of 2008 led to a plunge in the stock price and Xstrata did an equity offering that fixed their overextended balance sheet. This gave us the buying opportunity we were looking for. The focus of the company on copper and coal also was very attractive because of the strong demand and sustainably high margins, and because the company was moving very aggressively to reduce its costs."

What is your top "under the radar" stock pick?

DeGroot: Likewise, here are some comments from another subadviser on a sleeper pick: L.E. Lundbergforetagen or "Lundbergs."

"Lundbergs is a Sweden-based holding company that owns assets that can be broken down into two groups, an unlisted real-estate subsidiary and a stake in publicly listed holdings.

"Although 2008 was a difficult year for the company, Lundbergs' long-term investment track record has been impressive. Despite the aforementioned setback in 2008, the company managed to grow its net asset value per share by an average annual rate of nearly 10% during the 10 years ended Dec. 31. During that same period, Lundbergs' average annual total shareholder return was nearly 16%.
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