"It's almost amusing after a while," says Robert Sanborn as he recalls watching all the new mutual fund money (and a lot of managers) chasing nothing but go-go growth. But many of his shareholders didn't find the returns of Sanborn's

(OAKMX) - Get Report

Oakmark fund in 1998 and early 1999 all that funny.

Up just 4% last year, the once-top-performing large value fund landed in the bottom 10% of its category. And for nine months, Sanborn didn't see a single day where more money flowed in than out of the fund, which quickly lost $3 billion, one-third of its assets.

Though that heavy outflow forced him to sell stocks he still liked, Sanborn says he never once thought of shifting strategy. "We've never changed our philosophy."

Indeed, the small Chicago-based Oakmark fund family is known as perhaps the most persistent (some might say stubborn) value firm in the industry. The approach is simple: Buy stocks at a discount -- defined as 60% or less of a company's value -- and sell when the stocks reach 90% of that value. It leads Sanborn far from the highfliers that propelled this bull market to record heights. Instead, he is drawn to the unloved and unwanted;

Philip Morris

(MO) - Get Report

and

Nike

(NKE) - Get Report

have long been top holdings.

Though he hasn't changed, Sanborn thinks the mindset of investors may be changing. Actually pulling ahead of the

S&P 500

with a 10% year-to-date gain, Oakmark now outperforms more than half its rivals. "I definitely sense a shift," Sanborn says.

International Fund Also Surges

A shift in fortune has been even more dramatic for Sanborn's colleague, David Herro. His

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Oakmark International Small Cap fund went from losing 20% in 1997, almost rock bottom among foreign funds, to the very top of the category for the past 12 months, delivering a 39% return.

The former college triathlete is even hotter this year, sprinting past the S&P with a 50% return in just four months. Herro did so by running in the opposite direction of most other international investors. He keeps less than half his assets in Europe. "To think that Europe has discovered capitalism just isn't right," he says.

That kind of thinking meant he missed out on much of the bull market there, but bargain hunting in Asia and Latin America long before it was popular is paying off. "If you believe in the concept of buying low and selling high, you can ignore what the crowd is doing."

Shareholders didn't ignore the below-average performance of both the funds he co-manages. International Small Cap gained just 9% in 1998 and

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Oakmark International actually lost money. It was down 7% for the year. Herro estimates that $2 million to $3 million in assets poured out of his funds daily. "We lost a lot of people in August and September."

But he never abandoned his search for businesses such as Hong Kong retailer

Giordano

. Its stock plummeted by more than 50% during the Asian crisis. "It had grown its sales, had no debt. That's the perfect example of the baby being thrown out with the bath water. We love owning that stock," says Herro.

Herro also likes the engineering and retail sectors in the U.K. He also thinks there is much opportunity in Hong Kong and New Zealand and in German small-cap firms. But he's still underweighted in Europe compared with his peers. If that strategy once again is in stark contrast to the majority of his competitors? No matter. "Sometimes you look silly. But I don't get paid to look pretty."

Select Sizzles

Bill Nygren, manager of the 2 1/2-year-old

(OAKLX) - Get Report

Oakmark Select fund, hasn't suffered the ups and downs Herro and Sanborn endured this decade. In 1997, a whopping 55% gain ranked Select not only in the top 1% of all mid-cap value funds but as one of the top performers among all equity funds. In 1998, Nygren delivered less than a third of that, but he again beat almost all of his peers. For 1999, he is right back up there on top again, with a 20% return.

This is Nygren's first fund, but he is by no means a rookie. He made a name for himself as the director of research for

Harris Associates

, Oakmark's parent company. As steeped in the Oakmark tradition as any of his partners, he saw no reason to veer from value, even when his 1998 performance fell far behind his sizzling first year. "There's never the temptation to abandon philosophy," he says.

The concentrated portfolio, usually no more than 20 holdings, saw a lot of changes this year. Nygren sold all the cable companies that helped catapult Select in 1997. Gone in the first quarter:

Cablevision

(CVC)

and

Liberty Media

(LMG.A)

. Another top position,

Amgen

(AMGN) - Get Report

, also was cut.

Washington Mutual

(WM) - Get Report

, the largest savings and loan in U.S., is now the $1.8 billion fund's largest holding. And he added

Liz Claiborne

(LIZ)

and

Times Mirror

(TMC)

to the mix.

And now? Nygren is not one to make market predictions, but he admits to sensing a change in sentiment. "The last month felt different -- starting to get a taste that

value stocks can go up faster than they go down."

Devotion to the value style will likely remain akin to a religion at Oakmark. But beyond a strict adherence to that investing philosophy, you won't find many rigid rules there. Sanborn, who displays a wicked sense of humor and is described by co-workers as "a character," quotes reggae music legend

Bob Marley

in a recent report to shareholders. Nygren included an entertaining top 10 list of reasons not to buy Internet stocks in his letter to investors.

The question remains, of course, has Oakmark turned the corner? Even this trio of the family's managers would concede it's probably too soon to tell. But Sanborn's stake in mid-cap industrials, bought last summer, is starting to pay off. And most of Oakmark's best-known funds can boast an exceptional long-term record.

Yes, the Oakmark guys know what it's like to be on top and bottom -- on a personal level as well. They are required to invest money in the funds they manage. But even if their firm hasn't put its performance problems behind it, they're certainly not complaining about the change in weather on Wall Street these days. Says Nygren, "It'll be fun to do this with the wind at my back."

Brenda Buttner's column, Under the Hood, appears Thursdays. At time of publication, Buttner had no positions in the funds mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks or funds. While she cannot provide investment advice or recommendations, Buttner appreciates your feedback at

TSCBrenda@aol.com.