UCLA Investors' Three Best-Performing Holdings

Why Apple? The SIF bought Apple in May when the stock was trading around $105. According to Aobdia, Bryan Applequist and Erik Gulsrud, the two student analysts who cover Apple, picked it because of the company's "track record of successful product innovation" and felt this year would be "a standout year for new product potential, which would help fuel momentum behind the stock." Aobdia added that Apple "consistently beat earnings estimates , and we counted on management's ability to continue to do so for strong near-term performance."

Why Express Scripts instead of Medco Health Solutions(MHS Quote - Cramer on MHS - Stock Picks)? Erik Gulsrud, the SIF fellow who covers Express Scripts, which traded around $49 when the group bought it, explains: "I see Medco Health and Express Scripts as being very similar (although Medco Health is clearly larger at this point), and my call on Express Scripts was more of an industry call than picking the industry winner.

"I also felt that Express Scripts would gain momentum after failing in its effort to acquire Caremark, and I felt that the stock would see a nice appreciation in the short term following the CVS-Caremark deal (CVS Quote - Cramer on CVS - Stock Picks). ... Overall, I feel Medco Health is a great buy right now in general -- since they are saving money in an area where costs are spiraling out of control -- but in the end, I made a decision between the two based on which [company] I was more familiar with. With our short time frame for managing the money, I think it is important to go with companies you know well."

Why Berkshire Hathaway for around $3,600? Tim Davidson, the SIF fellow who covers Berkshire Hathaway, says the reason he bought the Warren Buffett-run company in May when the stock was trading at around $3,600 is that Berkshire "seemed priced to perfection without appropriate risk premiums ." Davidson added that on the basis of a "sum-of-the-parts analysis," Berkshire appeared undervalued .

The SIF's Benchmarks

To judge their investment performance, the SIF managers use two indices as their benchmarks : the Russell 1000 Growth Index for their growth portfolio and the Russell 1000 Value Index for their value portfolio.

According to Aobdia, the value portfolio is doing extremely well. He says that as of December, the value fund has outperformed its benchmark by about 14%. On the other hand, the growth fund's performance is more in line with its benchmark, underperforming it by a small 0.1%.

Dodging the Subprime Bullet

When the SIF fellows performed their economic outlook in the spring, some financial companies, such as HSBC (HBC Quote - Cramer on HBC - Stock Picks), warned of lower earnings. Davidson recalls that at the time, they "could not find many compelling values in financial stocks." The fellows understood that the subprime mortgage situation would probably have a negative impact on financials stocks, so they began to underweight their positions in financial institutions.

The SIF's suspicions were confirmed during the subsequent months.

Two exchange-traded funds (ETFs) that track the performance of the Russel 1000 Growth and Value Indices are the iShares Russell 1000 Growth Index (IWF Quote - Cramer on IWF - Stock Picks) and the iShares Russell 1000 Value Index (IWD Quote - Cramer on IWD - Stock Picks).

Plus, to learn more about benchmarking, check out "A Primer on Benchmarking Your Investments" and "How to Measure Your Investment Performance."

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