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16 Stocks Picked by Prize-Winning Fund Managers

Stocks in this article: ARW TDW XEC BRK.B CSCO RCII FTI DBD

(To add that Cisco Systems is showing signs of a turnaround with an outlook of 7% to 8% revenue growth in its current fiscal quarter.)

BOSTON ( TheStreet) -- Morningstar, the mutual fund research firm, said Artisan Partners' investment team of Scott Satterwhite, James Kieffer and George Sertl is its Domestic Stock Fund Manager of the Year for 2011.

Artisan Partners isn't a household name like Fidelity, Vanguard and BlackRock are. So it's worth breaking down the small firm's investment strategy and stock picks, especially since 2012 is expected to be another tough year for investing.

"We look for managers who nailed the past year on the heels of much lengthier success, and we measure achievement not only by observing trailing performance but also by reviewing managers' strategies in action over time," said Karen Dolan, the firm's director of fund analysis.

"Our selection process focuses not only on performance but also on how those returns were achieved," she said, as 2011's "winners stayed on track in a year of head fakes."

The Artisan Partners team shares management responsibilities for three funds that span the spectrum of market values for stocks, including the Artisan Small-Cap Value (ARTVX), Artisan Mid-Cap Value (ARTQX) and the large-cap Artisan Value (ARTLX).

Other winners of Morningstar's awards were: International-Stock Fund Manager of the Year to William Browne, John Spears, Tom Shrager and Bob Wyckoff of Tweedy Browne Global Value (TBGVX) and Fixed-Income Fund Manager of the Year for 2011 to John Carlson of Fidelity New Markets Income (FNMIX).

The year turned out to be one that favored contrarian, value-oriented stock-pickers such as the Artisan Partners team.

Artisan's Satterwhite said in an interview Thursday that the secret to success is that his team's value-oriented approach results in fewer big losers than most other funds, as their strategy minimizes downside risk.

They seek companies with stocks trading at steep discounts to their estimated value. They determine value based on attributions such as a healthy and steady cash flow, sustained reinvestment practices, a strong business model and balance sheet, and a good management team.

Satterwhite said Artisan assigns a value to companies before they're bought such that it will reduce risk. "Our advantage over the index is that we have fewer really bad performers and they cost us less" in terms of dragging down performance versus each fund's benchmark index, he said.

But that approach also means fewer really big winners as well, he said. "We don't look for the super-charged engine," Satterwhite said.

The managers aren't rapid-fire traders either, as evidenced by the average three- to five-year holding period for the typical stock. But the managers may raise or lower a funds' stake, or sell out a position and then buy in again later when values look better.

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