Ima Winner Fund Club: Dodge & Cox Stock Fund

Value funds dominate the bestseller list these days, so now is a good time to separate the Vonnegut from the, well, Grisham.

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Now that cash is finally gushing into value funds, we urge you to consider the no-load (DODGX Quote)Dodge & Cox Stock fund, the latest entry into our Ima Winner Fund Club, and ignore the broker-sold (SCSFX Quote)Seligman Common Stock fund, which we're inducting into our Ima Loser Fund Club. (No middling fund qualifies for these clubs, which seek out only the very best- and worst-performers in various categories.)

If you're not familiar with the value style, picture a flea market fanatic willing to sacrifice some shoe leather to find a bargain. Value managers scour the market, hoping to pay pennies on the dollar for the castaway shares of companies that have stumbled; growth managers pay retail for the trendiest stuff.

Value types' thrifty approach kept them out of the sizzling tech sector in 1999, when the average large-cap value fund gained just 7%, compared with 41% for its average growth peer. But their modest tech appetite is paying off now, with big-cap value funds down just 1% over the past 12 months, compared with a 38% free fall for their growth competitors, according to Chicago fund-tracker Morningstar.

We advocate owning both growth and value funds to diversify your portfolio because they tend to flourish in different environments. Until recently, growth funds were gobbling up the vast majority of money flowing into stock funds. Now the trend has reversed, but in picking a value fund it's still important to be choosy, as a look at our new winner and loser will clearly show.

The Winner

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