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No. 1 Small-Cap Fund Buys Robots, Mattresses, Ink Pens

BOSTON ( TheStreet) -- The $69 million Hodges Small-Cap Fund (HDPSX), based far from the financial world in Dallas, has an extraordinarily eclectic portfolio. And not for nothing. Three stock holdings have more than doubled in the past 12 months, including one that has almost quadrupled.

Craig Hodges, lead manager of the four-person investing team, said in an interview he bases his picks on the main fundamentals of individual companies, rather than taking a top-down approach based on industry performance. The in-house research team and portfolio managers study hundreds of companies, perform in-depth analysis and scrutinize each company's long-term investment potential.

In particular, they try to find shares that may be overlooked or misunderstood by more conventional approaches.

"We're totally company-focused," Craig Hodges says. "We try not to pay too much attention to the outside noise and try to identify companies in their (early) growth phase.

"We can find companies in this environment that are not affected" by the macro-economic conditions and volatility that characterizes the markets this year, he said. "We're finding companies that are successful in their businesses despite what's going on around them."

The fund, launched a week before Christmas in 2007, is a top performer in its small-blend category of funds with a return of 3.7% this year, which puts it in the top 1% of its peers, as tracked by Morningstar. It's up 26% over the past 12 months, ranking in the top 2%. The Russell 2000 Index, a small-cap barometer, has fallen 8% this year and risen 12% over the past 12 months.

Hodges Capital manages a family of five mutual funds, including the Hodges Small-Cap Fund.

Here's a summary of seven of the top-performing stocks in the Hodges Small-Cap Fund's portfolio:
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