MW This tiny mutual fund outperforms by backing the world's best management teams
By Barbara Kollmeyer
Alphabet and Mastercard are top holdings of this outperforming fund
Alphabet is home to a lot of winning businesses, says fund manager Tom Winmill.
While Alphabet is right in the middle of the artificial-intelligence build-out by offering a chatbot, cloud services and microchips, fund manager Thomas Winmill points to another business in the tech giant's toolbox that gets less credit: its millions of YouTube videos.
"I just don't think there's going to be any other business that's going to be able to do anything about that. People I know, thanks to YouTube, can learn how to re-side their house and fix their own car. And [Alphabet makes] so much money off that particular business alone," the manager of the $27 million Midas Special Opportunities fund MISEX told MarketWatch in an interview.
Of course, there's far more to the fund's 40% stake in Alphabet $(GOOGL)$ $(GOOG)$ than DIY videos. Winmill, a former lawyer, took over the fund in 2012 from his father, who bought the tech giant, then called Google, and the second-largest holding, Mastercard $(MA)$, early in the 2000s and never sold. The average cost basis of those stocks for the fund is a mere $9.56 for Alphabet and $9.37 for Mastercard.
Winmill said capital appreciation is the sole purpose of the fund, which has outperformed the S&P 500 on three-, five- and 10-year annualized bases.
"What we like to see in the numbers are a lot of free cash flow and then the ability of that company to reinvest free cash flow in order to get the compounding effect, and Alphabet has the ability to do so," he said, adding it has an "unassailable advantage in growth." He said he favors Mastercard for many of the same reasons.
Longtime holding AutoZone $(AZO)$ was cut a couple of months ago after the auto-parts chain failed to generate revenue growth. "They were basically investing in a business that was slowing down by buying back their stock, taking on debt. Those are bad signs," he said. "And then they're going to lower-margin markets like expanding into Central and South America."
AutoZone was replaced with "terrific names," like Microsoft $(MSFT)$, which had historically been too expensive for the fund. The fund bought Microsoft in early April when shares dropped to around $370 on fears AI was going to dislodge it, buying it at around 23 times earnings.
The fund also added Constellation Software (CA:CSU), another stock that Winmill viewed as unfairly sold off this year, buying it for 17 or 18 times earnings.
Lam Research $(LRCX)$, J.P. Morgan Chase & Co. $(JPM)$, Williams-Sonoma $(WSM)$, Berkshire Hathaway $(BRK.B)$ and Progressive Corp. $(PGR)$ are also in the portfolio, with that last name a "cheap" favorite of his.
"They're growing, and they have a dynamic approach to pricing in the market," along with a solid history and focused management, he said of the insurer.
As for his Berkshire holding, he noted the results haven't been "as dynamic as we were hoping," with a "subpar" return on assets. However, given Berkshire's vast cash flow, he said the stock will probably "perform in the next financial crisis."
Winmill said his bets rely on smarts at the tops of companies. "One thing that we can be pretty sure of, is that the management of Alphabet, Mastercard, Lam, JPMorgan, Williams-Sonoma, Constellation, Progressive and Microsoft have the resources to attract probably some of the smartest people in the world."
"I feel pretty comfortable that, when my day ends, they're probably still having late-night meetings and working out how to increase their competitiveness and what they have to offer," he said.
As for the AI narrative and the excitement it's created, he is concerned that revenue for some of those companies will end up banking on short-term product cycles.
"I'll miss the moonshots. Absolutely. I'm not worried about that. What I'm trying to do is invest my money, and this fund, in companies where I know they have one of the best management teams in the world," he said.
The markets
U.S. stock futures (ES00) (YM00) (NQ00) are climbing, led by tech, as oil prices (CL.1) (BRN00) drop.
Key asset performance Last 5d 1m YTD 1y S&P 500 7405.73 -2.56% -0.10% 8.18% 23.31% Nasdaq Composite 25,929.66 -4.27% -1.31% 11.56% 32.35% 10-year Treasury 4.561 11.50 10.40 38.90 8.10 Gold 4355.4 -3.62% -7.78% 0.54% 30.21% Oil 88.96 -4.74% -12.83% 54.96% 37.41% Data: MarketWatch. Treasury yields change expressed in basis points
The buzz
Pharma giant GSK $(GSK)$ announced a $10.6 billion deal to buy biotech Nuvalent $(NUVL)$, its biggest purchase in eight years.
Applied Digital's stock (APLD) is rising after the company signed a lease for one of its AI data centers with a U.S.-based hyperscaler.
Vail Resorts shares $(MTN)$ are dropping after the resort giant reported weak ski-pass sales and cut guidance.
The National Federation of Independent Business reported a further fall in business optimism. Data on the U.S. trade balance for April are due at 8:30 a.m., followed by existing-home sales and wholesale inventories at 10 a.m.
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The chart
Mark Newton, head of technical strategy at Fundstrat, has warned that the bounce in stocks following Friday's rout is likely a dead-cat bounce because more stocks fell than rose on Monday, with reduced volume. He also points to a downturn via his chart of the S&P 500 Cycle Composite - a predictive market model combining historical seasonal and calendar trends. He said that cycle forecast a peak around current levels but has now "rolled over, turning negative between now and at least late July with the risk of lower prices into October."
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-Barbara Kollmeyer
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June 09, 2026 07:37 ET (11:37 GMT)
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