Past Performance Can Be Guide to Future

In 2008, the fund lost 43.3%, trailing the S&P 500 by 6 percentage points. That was a disastrous result, but not the worst relative showing. The fund trailed the benchmark by 23 percentage points in 1998 and by 9 points in 1991, other years when investors shunned financial and value stocks.

Despite the disappointing years, Dodge & Cox has rewarded long-term investors. For the 20 years ending in March, the fund returned 9.1% annually, compared to 7.3% for the S&P 500.

Can Dodge & Cox continue winning over the long term? Yes. Because the portfolio managers are not changing their strategy, there is good reason to believe the fund can outdo the benchmarks in the future as it has in the past.

Over the decades, Dodge & Cox has followed a consistent approach, buying solid stocks that are temporarily selling at cheap prices. After buying, the portfolio managers hold for the long term. Many stocks have been in the portfolio for more than 10 years. The strategy has rarely varied because portfolio managers tend to stay at the firm for years. John Gunn, chairman of Dodge & Cox, has been a portfolio manager on the fund since 1977.

Other large value funds with long-tenured managers that have crushed the S&P 500 over the past 15 years include American Century Value(TWVLX Quote), American Funds Investment Company of America(AIVSX Quote) and Sound Shore(SSHFX Quote).

Performance data can also provide insights about bond funds, such as Calvert Income(CFICX Quote). During the past five years, the fund returned 0.4%, a percentage point behind the average intermediate-term bond fund. That mediocre record can be attributed to a single bad year. In 2008, the bond fund collapsed, losing 12% and trailing the average intermediate-term bond fund by 7 percentage points. But over the long term, the record has been strong. During the past 15 years, the fund has returned 6% annually, outdoing 85% of its competitors and beating the average intermediate fund by a percentage point. In 11 of the past 15 years, Calvert has outperformed.