The Daily Screen: Top Large-Cap Value Funds With Tenured Skippers

If you're looking for a solid value managers, fresh eyes aren't necessarily what you're after.

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Value managers are Wall Street's bargain hunters. They typically scour the market looking for stocks they believe are selling for prices below their true value. Of course, this is far from an exact science. Cheap stocks are often cheap for a reason and keep on sinking. Discerning cheapness from value is a dicey proposition and one that's usually honed after years of choosing between value stocks and value traps.

That's why today the Daily Screen is combing through the large-cap value fund category to find some funds with solid results and managers who have been in place for a while. Because value funds traditionally have light stakes in the market-leading and pricey tech sector, they haven't been on many investors' radar screens in recent years. But with tech stocks tumbling, value funds have shown why diversifying among growth and value investment styles makes sense.

Something of Value Value funds of the large-cap variety are in the black this year on average
	Avg. Large Cap Value fund	S&P 500
YTD Return	3.5%	-5.8%
1-Year Return	6.1	-1.3
5-Year Return	13.7	19.2
10-Year Return	14.8	18
Source: Morningstar. Annualized performance figures through Dec. 11.

To look for solid big-cap value funds, we've sifted the 326-fund category for those that beat their average peer this year and over the past five years with the same manager at the helm, according to Morningstar. Here's a top-10 list of the funds we dug up, ranked by their returns since Jan. 1.

Large-Cap Value Funds With Steady Hands This offerings have turned in stellar performances while maintaining steady leadership
Fund	Year-to-Date Return	5-Year Annualized	Mgr. Tenure
(KDHAX)Kemper-Dreman High Return A	31.7%	17.2%	12 years
(CFIMX)Clipper	31.6	19.2	16
(VUSVX)Vontobel U.S. Value	28.8	15.7	10
(SAOPX)Salomon Bros. Opportunity	21.4	15.4	21
(AMSTX)Ameristock	18.4	22.4	5
(DAGVX)Dreyfus Aggressive Value	17.5	20.2	5
(ACGIX)Van Kampen Growth & Income	17.1	18.2	5
(MSIVX)MSDW Value Equity A	16	17	8
(SHFVX)Smith Barney Fundamental Value A	13.7	19	10
(VWNFX)Vanguard Windsor II	12.4	15.3	10
(SHFVX)Avg. Large Cap Value fund	3.5	13.7	3
(VWNFX)S&P 500	-5.8	19.2	-
Source: Morningstar. Annualized performance figures through Dec. 11.

Given the beating tech stocks have taken this year, you're probably not surprised that many of these funds have modest or no exposure to the tech sector. We screened our leading funds' portfolios to see what stocks they're betting on, but first let's look at the funds themselves.

At the top of the list you'll find two solid options. High-profile manager David Dreman focuses on unloved stocks in sectors like financials and consumer staples with the broker-sold (KDHAX)Kemper-Dreman High Return fund. At the end of June, the date of the latest portfolio data available for the fund on Morningstar, the fund owned no tech stocks at all. This measured approach might not make your pulse race, but the fund's 20.3% annualized return over the past 10 years beats the S&P 500 by more than 2% and beats 98% of the fund's peers.

In running the no-load (CFIMX)Clipper fund, co-managers James Gipson and Michael Sandler only buy stocks when they think they're selling at 30% less than their private market value. That strategy led to a financial stock position topping 44% on Sept. 30 and a solid track record. Over the past one-, three-, five- and 10-year periods, the fund beats the S&P 500 and more than 90% of its peers.

Other no-load standouts on our list are the (SAOPX)Salomon Brothers Opportunity fund, where Irving Brilliant has held the reins for more than 20 years, and the (VWNFX)Vanguard Windsor II fund, where Jim Barrow has been the lead manager for 10 years.

The Salomon fund has minuscule turnover and a whopping 61% stake in financial stocks, while the Vanguard fund is a more vanilla value fund with a big portfolio and less severe sector weightings.

If you work with a broker, a solid choice might be the (SHFVX)Smith Barney Fundamental Value fund where John Goode has been in charge for 10 years. The fund has a significant 16.2% tech stake, but it still beats the S&P 500 and more than 90% of its peers over the past one-, three-, five- and 10-year periods, according to Morningstar.

Value funds are known for putting a lot of money in financial stocks and this list fits that bill. Screening the portfolios of these leading funds, we find a cumulative top-10 list with eight financial stocks. As you might expect, powerhouse Citigroup(C) is on the list, but Fannie Mae(FNM) and Freddie Mac(FRE) lead the pack.

Under the Hood The stocks with the biggest weighting in the combined portfolios of the 10 above funds
Stock	Weighting in Top-Ten Funds	Number of Top-Ten Funds Owning the Stock
Fannie Mae(FNM)	2.9%	6
Freddie Mac(FRE)	2.6	6
Philip Morris(MO)	2.2	7
Bank of New York(BK)	2.1	4
Chubb(CB)	1.8	3
American International Group(AIG)	1.2	6
Allstate(ALL)	1	4
Citigroup(C)	1	4
ExxonMobil(XOM)	1	5
PNC Financial Services(PNC)	1	5
Source: Morningstar. Holdings as of funds' most recent portfolio reports.

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