Among the least risky choices in the large blend category is Manor, which outpaced average peers by 6 percentage points during the downturn of 2008. During the past five years, the fund returned 4.5% annually, surpassing competitors by half a percentage point, according to Morningstar. Portfolio manager Daniel Morris looks for companies with rock-solid balance sheets and the potential to grow steadily. He aims to buy when valuations seem modest. Holdings include such blue-chips as Colgate-Palmolive (CL) and Walt Disney (DIS). "We want to deliver above-average returns with below-average risk," says Morris. Once he buys, Morris holds patiently. The fund turns over only 10% of its portfolio annually. So the average holding remains in place for 10 years. In contrast, the average large blend fund turns over 69% of its portfolio annually. A longtime holding is Pepsico (PEP). Lately the company has been lagging the growth rate of archrival Coca-Cola (KO). But Morris is not troubled. He says that Pepsico's snack business remains a standout. In the perennial contest between the two leading beverage companies, Pepsico has periodically suffered slow periods, but it has always bounced back.
Another holding is Franklin Resources (BEN), a mutual fund company. As investors have poured into Franklin's bond funds, the company has reported growing earnings and fat profit margins.