Funds Stick With GM

If you're one of the many people worried that General Motors(GM Quote) is driving straight toward bankruptcy, then you better check to see if your mutual fund is going along for the ride.

The $8.6 billion (LLPFX Quote)Longleaf Partners fund, which specializes in deep-value stocks and often dabbles in troubled companies, tops the list of funds with the most concentrated position in GM. As of Sept. 30, Longleaf held 2.5% of GM's outstanding shares, or approximately 5% of the fund's total assets, according to fund tracker Morningstar.

For most funds, 5% would be considered a huge position, but GM doesn't even rank among Longleaf's biggest holdings, coming in just outside the top 10. Longleaf's managers run a concentrated fund of 27 stocks with a 57.3% spread across its top 10 holdings. Longleaf's largest positions are in Vivendi(V Quote), a media company recovering from troubles of its own, at 6.8% of assets; and Mexican cement company Cemex(CX Quote), at 6.7%.

With so much writing on the wall regarding GM's pension, profit and market-share problems, Longleaf shareholders may be wondering why the fund's managers have been hanging on to the company's shares. Nevertheless, longtime portfolio managers Mason Hawkins and Staley Cates (a third fund manager, John Buford, left in December) have proven they can spot value, so much so that Morningstar has given the fund a full five stars. The fund has returned 8.6% annually over the past five years, 7.35 percentage points better than the S&P 500 index. Longleaf's managers don't comment on individual holdings.

"Given the managers' long-term orientation and penchant for buying troubled companies -- General Motors, for example, dinged the fund in 2005 -- there will be periods when the fund underperforms," says Morningstar analyst Chris Traulsen. "However, its long-term record is excellent, and with its talented management, proven style, and history of doing right by its shareholders, we believe the fund has the pieces in place for continued success."

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