Tech stocks' implosion has made tech-light value funds look pretty good, but that doesn't mean you shouldn't be picky.
In 1998 and 1999, the average growth fund stuffed more than a third of its money into the sizzling tech sector. That worked out well then, but with the tech-laden
Nasdaq Composite down more than 40% over the past year, bargain-hunting value funds that typically steer clear of pricey fare have flourished by comparison. Big-cap value funds, for instance, are up 18% on average over 12 months, according to Chicago fund tracker Morningstar. Their average growth peer is down more than 30% over the same period.
The dichotomy of the two styles' returns hasn't escaped investors. Last year, record billions gushed into tech- and tech-heavy growth funds. But in the first half of this year, value fund inflows have
outpaced redemptions by more than $38 billion, reversing a $48 billion net outflow in the first half of 2000. As with any fund category, there are stars and also-rans, so today the Big Screen will try to make your value fund shopping easier by fishing for some solid candidates.
From the large-cap value fund pools, we sifted out those that beat their peers over the past one, three and five years. Then we tossed out any funds with above-average expenses, an investment minimum north of $10,000 or a manager who'd held the reins for less than five years. Here's our top 10, ranked by their returns over the past five years.
There are some all-stars here.
The no-load
(CFIMX Quote - Cramer on CFIMX - Stock Picks)Clipper, broker-sold
(KDHAX Quote - Cramer on KDHAX - Stock Picks)Scudder Dreman High Return and no-load
(DODGX Quote - Cramer on DODGX - Stock Picks)Dodge & Cox Stock funds all beat the
S&P 500 and at least 90% of their peers over the past one, three, five and 10 years, according to Morningstar.
The trio of managers who run the
(CFIMX Quote - Cramer on CFIMX - Stock Picks)Clipper fund won Morningstar's coveted manager of the year honors last year. David Dreman is one of the fund world's most renowned contrarian investors, strictly buying stocks on Wall Street's scrap heap. That said, you might steer clear of these funds if you don't like volatility, because each tends to make big bets on companies and sectors.
| Value Indeed |
| Fund Category | 1-Year Return | 3-Year Return |
| Large-Cap Value | 17.8% | 5.3% |
| Large-Cap Growth | -30.4 | 3.1 |
| Mid-Cap Value | 17.8 | 10.1 |
| Mid-Cap Growth | -25.3 | 9.4 |
| Small-Cap Value | 24.2 | 9.6 |
| Small-Cap Growth | -14.3 | 11.5 |
| S&P 500 | -14.4 | 4.1 |
| Source: Morningstar. Returns through Aug. 1. |
A more palatable choice for the conservative investor is the Dodge & Cox fund, which tends to spread its money a bit more broadly around the market. Another is the no-load
(AMSTX Quote - Cramer on AMSTX - Stock Picks)Ameristock fund, which tops our chart. There, manager Nicholas Gerber buys the cheapest, highest-yielding stocks he can find among those with market caps above $15 billion. Focusing on the shares of huge companies has kept the fund's volatility in check.
If you're interested in a strict value approach where managers buy shares only of unloved companies they think are trading at a deep discount to their actual worth, any of these funds fit that bill. Another fund you might consider that barely missed our list thanks to a tough 2000 is the no-load
(LMVTX Quote - Cramer on LMVTX - Stock Picks)Legg Mason Value Trust. Value legend
Bill Miller is the only fund manager to have beaten the S&P 500 in each of the past 10 years.
If you don't mind a bit more legwork, take a look at the no-load
(SLASX Quote - Cramer on SLASX - Stock Picks)Selected American fund, which missed our cut only because of a 7% loss over the past year that trailed its peers. Lead manager Chris Davis has held the reins since 1994. He and co-manager Kenneth Feinberg scour the market for undervalued companies they're willing to hold for years.
That's led them to cratered tech companies like
Tellabs and
Lucent, down more than 50% this year alone, but the fund's 17.8% annualized gain over the past five years beats the S&P 500 by more than 3 percentage points and tops 95% of its peers. The fund has beaten the large-cap value category average in each of the past six years, as well.
What about small- or mid-cap value funds? Well, we're whipping that screen up right now. If you can't wait, check our list of
favorite value funds.
Ian McDonald
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