Five Funds: Large-Cap Value Offerings That Beat the Herd

Back in the late 1990s, when value was defined down to include tech stocks with a price-to-earnings multiple under 40, large-cap value managers faced tremendous pressure to stick to their guns. You could probably write a "Profiles in Investing Courage" highlighting the best of them.

In the meantime, we'll dedicate this week's Five Funds to highlighting some of the best-run large value funds. Of the 10-15 truly stellar large-cap value funds out there, we tried to choose a variety pack: some that play up dividends, some that take a focused approach, some that are taking on a little risk, and so on.

All five, however, have the essentials: Outstanding management teams, returns that stand near the top of their category over the long haul and below-average costs.

1. (CFIMX)Clipper

The easiest way to sing the praises of this outstanding fund (full disclosure: it's in my IRA account) is to rattle off the numbers, courtesy of Morningstar: Its one-year loss of 13.7% ranks in the top 7% of all large value funds. Clipper's three-year average annual return of 12.97%, five-year return of 7.73% and 10-year return of 14.53% all rank in the top 1%.

That's probably enough said, but investors should know a little more about Clipper. The fund, opened in 1984, has five co-managers at the helm who have a combined 72 years at Clipper. The skippers only keep about 35 companies in the fund and don't trade often, helping keep the expense ratio at 1.08%, below the 1.45% category average.

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On Clipper's Web site, the managers detail their strict valuation-based philosophy: Companies are only added to the portfolio when shares trade at less than 70% of intrinsic value. This approach often leads them to unloved companies such as America Online(AOL), Electronic Data Systems(EDS) and Tyco(TYC). Clipper also got pinched a bit by its recent acquisition in Tenet Healthcare(THC). While some of these companies might give investors jitters, the name Clipper shouldn't. It's a great fund.

Another strong, concentrated fund in the large-value category that isn't afraid to bet on a few unloved stocks is (KDHCX)Scudder Dreman High-Return Equity, helmed by long-time skipper David Dreman.

2. (DODGX)Dodge & Cox Stock

The Dodge & Cox Stock fund shares many attributes with Clipper. It boasts a deep bench of great managers: Its 10-member committee has an average tenure of 22 years at Dodge & Cox. It also boasts outstanding short- and long-term returns with below-average costs -- its expense ratio is a meager 0.54%.