Hot Tip From Liberty Acorn Skipper Wanger: Real Growth Takes Time

Acorn's Progress The Liberty Acorn fund has been a stellar performer compared with its small-cap growth peers
Time Period	Percentage Return	Percentage Ranking Among Peers
Year-to-date	-10.18%	Top 3%
One Year	-4.37	Top 5
Three-Year Annualized	4.79	Top 9
Five-Year Annualized	8.83	Top 10
10-Year Annualized	13.25	Top 6
Sources: Morningstar

Take companies like Ford(F Quote) and Sears(S Quote). These battered companies used to be the pillars of our economy. Sears used to be the biggest retailer in the U.S. It now has a market capitalization of about $8 billion, which makes it smaller than Amazon.com(AMZN Quote).

Any falling dinosaurs piquing your curiosity?

These companies don't particularly interest me on the downside. I'd rather put my money behind a few smaller, high-growth companies that look to replace some of the old dinosaurs as they continue to grow.

Trying to figure out which ships start rising again is too difficult -- I don't want to work that hard. I'd rather find little companies that are poised to keep growing.

3. Let's talk about some of those little companies. According to Morningstar, your largest stake is in financial-services firms [23.1%, a little above the small-cap category average]. Do you make broad plays based on sectors, or are you more of a bottom-up investor? Also, which financial-services stocks do you like?

Well, I do a little of both. My financial-services stake is similar to what you will find in many small-cap funds. It happens to be where a lot of the small companies with good growth prospects are. And it's a good business in general, a good place to be.

We find a lot of small banks that are good businesses, some look like possible acquisition targets.

We have decent positions in asset-management companies -- Eaton Vance(EV Quote), SEI Investments(SEIC Quote), Neuberger Berman(NEU Quote). We think these companies will continue to grow, and that the asset-management business still has upside. [Eaton Vance's average annual return for the past five years is 30.4%; SEI is 34.9%; Neuberger, which went public in 1999, has an average annual return of 24% during the past three years. Eaton Vance CEO Jim Hawkes was profiled as one of seven executives for TheStreet.com's Good CEO Portfolio.]

4. You have held a few of those companies for a while. Do you have any specific time frame to hold on to a stock?

Well, let's see. I haven't held any stock for longer than 30 years. But I wasn't investing before then, so I suppose 30 years is a good time frame (laughs).

I prefer to hold stocks for as long as they continue to grow. We've held stocks for decades in the fund, as long as the company continues to deliver. That kind of long-term approach to investing doesn't make our brokers much money, but it has kept turnover down, which means expenses -- which run high in the small-cap world -- have been a bit lower than our peers. Our turnover has been running at about 20% a year, and it may be a little lower this year. [Liberty Acorn's expense ratio is a mere 0.82%, less than half the category average of 1.66%.]