Fewer than one in 10 big-cap value funds made our cut, but those that did are certainly worth a look.
If there's a theme among the five funds on our list, it's that they consistently buy shares of companies they think are trading below their true value and hang on to them for years. That might sound simple, but their habitual outperformance of their average peer illustrates their skill. Three of these funds stand out in particular:
Van Kampen Comstock, and
Dodge & Cox Stock.
A team of five managers has run the no-load Clipper fund since the 1980s. Over time they've only bought shares of a company when they think its battered stock is trading at least 30% below what they think it's worth. The fund has topped the
and a whopping 99% of its peers over the past one, three, five and 10 years, according to Morningstar. Beyond solid performance, the fund's low trading style has also averted taxable capital gains distributions. The fund's turnover ratio is half that of its average peer, and the fund has been more tax-efficient than 98% of its competitors.
The fund's management team won Morningstar's domestic stock fund manager of the year award in 2000, when the fund posted a 37% gain, topping its average competitor by more than 30 percentage points.
Robert Baker, lead manager of the broker-sold Van Kampen Comstock fund since 1994, has stayed ahead of the pack by shunning Wall Street's herd. He and his management team typically focus on unloved slivers of the market and tend to have a taste for utilities stocks. The fund beats 98% of its peers over the past five years and has finished ahead of its average peer in six of the past seven calendar years.
Another intriguing option is the no-load Dodge & Cox Stock fund. Started in 1965, eight portfolio managers run the fund, and all but one has worked on the fund for at least 15 years. Like the folks behind the Clipper fund, the Dodge and Cox managers tend to shop for stocks they think are trading below what they think they're worth and hold onto them for years.
Like many value fund types, the fund's management team favors financials like
and industrial companies like
. If you're wondering, its biggest tech holding is fuddy-duddy
The fund has beaten its average peer in 11 of the past 15 years, according to Morningstar.
In addition to the funds we netted, there are two slightly more aggressive no-load funds that you might want to check out:
Legg Mason Value Trust and the
Excelsior Value & Restructuring fund.
Bill Miller, manager of the Legg Mason fund, is often called the modern-day Peter Lynch because he's the only fund manager to
top the S&P 500 in each of the past 11 years -- a feat even the legendary Lynch never achieved.
Despite his results, Miller often draws some fire for his style. Unlike many traditional value investors, he doesn't stick by metrics like a stock's
price-to-earnings ratio, or shun expensive tech fare outright. Instead, he buys shares of companies he believes are bargains given their future cash flows. That's led him to some controversial picks like
AOL Time Warner
Amazon.com, which he blends with more standard fare like financial stocks.
Because he owns more tech and telecom stocks than his average peer, Miller's trailed the average big-cap value fund over the past one and three years. Then again, the streak speaks for itself.
David Williams, manager of the Excelsior fund since its 1992 launch, also missed the cut because of his tech tastes. He looks for stocks of companies he thinks can grow their earnings by streamlining or reorganizing their business. The approach has helped him beat his average peer in all but one calendar year since the fund's inception. The fund, which I own, trails its average peer over the past year but leads 98% of the category over the past three years.
Click on these links to check out the other funds we dug up:
Mid-cap value funds
Small-cap value funds