This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

10 Stocks Veteran Investors Buy to Start a New Fund (Update1)

(Story updated to add that Mohawk Industries has invested in a China tile maker.)

BOSTON (TheStreet) -- What would a pair of veteran mutual fund managers buy if given a clean slate?

The $130 million GoodHaven (GOODX), launched a year ago by former Fairholme Fund (FAIRX) managers Larry Pitkowsky and Keith Trauner contains the answer.

These former Berkowitz acolytes' fund holds six of their favorites from when they were at Fairholme, where they were at various times analysts, fund managers and outside advisers from roughly 1999 to 2010. During that time, the fund had the large-value category's best return -- 13.6% versus 3.6% for its rivals, according to Morningstar.

Those six stocks are: Warren Buffett's Berkshire Hathaway (BRK.B), retailing giant Sears Holdings (SHLD), the Bermuda-based insurance holding firm White Mountains Insurance (WTM), investment banker Jefferies Group (JEF), gold miner Barrick Gold (ABX) and flooring manufacturer Mohawk Industries (MHK).

Other than that, the two are intent on going their own way. The new stocks in the 18-position GoodHaven portfolio range from mega-cap industry leaders such as Microsoft (MSFT), to small-cap relative unknowns such as Quanex (NX), a maker of aluminum products used in doors and windows.

Morningstar analyst Kevin McDevitt says Pitkowsky and Trauner "follow a similar go-anywhere value approach" to that of Fairholme, which entails "buying securities across the capital structure and of any market cap."

An example of that is the fund's biggest bet, Spectrum Brands Holdings (SPB), at 11% of the fund. It is a diversified consumer products company that emerged from bankruptcy in 2009.

"Trauner and Pitkowsky believe that it will pay off a large chunk of its high-cost debt over the next year, creating substantial free cash flow," McDevitt said in his review of the fund.

The fund's second-largest holding, at 8%, is another out-of-favor stock, computer conglomerate Hewlett-Packard (HPQ), which is in the midst of trying to reinvent itself in a rapidly changing marketplace.

The GoodHaven fund is up 14% this year, putting it in the top 20% of funds in the large value category, as tracked by Morningstar. The S&P 500 is up 13%.

In contrast, the Fairholme Fund, with $8.2 billion in assets, has risen 30% this year versus the 13% for its fund category, putting it in the top 1% of those funds. It's also been the top-performing actively managed domestic stock fund of all categories this year. But if you look one year out, the results show a 10% decline, due to Fairholme's horrendous 2011, when the fund lost 32%, primarily due to too-early bets on the recovery of financials, a wager that is paying off now.

Here are 10 of the 18 stocks in the GoodHaven fund portfolio in inverse order of their return this year:

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,001.22 -38.27 -0.22%
S&P 500 1,988.40 -3.97 -0.20%
NASDAQ 4,538.5510 +6.4470 0.14%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs