Value investing is back in style, but buying a bargain-hunting fund with high expenses will never be chic.

Screen Gems:
High Returns, Low Fees

Small- Cap Growth Funds

Mid- Cap Growth Funds

Large- Cap Growth Funds

Tech Funds

In its continuing effort to dig up solid value funds that live up to their names by charging modest expenses, today the Big Screen is sifting the mid-cap value fund pack. (Last week we looked at

big-cap value funds and we'll check out small-cap value funds on Thursday.)

These funds might not have the sexiest label, but they deserve about 10% of a diversified portfolio's assets, using the broad

Wilshire 5000 Total Market Index

as an allocation model. Like most value funds, they typically look for companies with steady earnings growth and a modestly valued stock relative to their peers and/or the broader market. Their mid-cap mandate means they mainly look at companies with market capitalizations anywhere between about $2 billion and $9 billion.

As you might imagine, these funds' price-conscious approach means they focus more on the likes of financial services and cyclical stocks, rather than pricier and more mercurial tech fare. This held them back between 1995 and 1999, when growth stocks in general and tech stocks in particular were lords of the market. But last year these funds gained nearly 17% on average while the

S&P 500

lost more than 9%, illustrating why it makes sense to diversify your money among funds with different styles.

Mid-Cap Value Line
Apart from a big 2000, mid-cap value funds have,
on average, lagged behind the market

Source: Morningstar. Annualized performance figures through Feb. 5.

Given the steep cash flows to growth funds in recent years, it seems there are a lot of investors out their whose tech-stuffed portfolios got burned last year. If you're shopping for a good, cheap mid-cap value fund to balance out your portfolio, there are 126 to choose from, but we can whittle the list. Instead of just screening for good performers, we also screened out funds with high fees that erode returns over time. We sifted the category for those funds that beat their average peer over at least the last one- and three-year periods, according to

Morningstar

. Then we yanked out any funds that charge loads or sales charges, carry annual expenses above the category's 1.46% average or have minimum investments above $10,000. That left us with less than 20 funds. Here's a top-10 list of funds that made the cut, ranked by their one-year returns.

You might be wondering why mid-cap value mavens Bill Nygren, manager of the no-load

(OAKLX) - Get Report

Oakmark Select fund, and Wally Weitz, manager of the

(WVALX) - Get Report

Weitz Value fund, didn't make the cut. Long story short, there are good reasons why they aren't on the list, but both are solid funds, worthy of consideration by value-hungry investors.

Nygren's Oakmark Select fund beats more than 90% of its peers over the past one- and three-year periods, and its 22.8% three-year annualized return beats the S&P 500 by more than 10 percentage points. The fund's 2% fee on short-term redemptions kept it off our list, but Nygren is a gifted manager -- check out this recent

10 Questions interview to read more on his approach.

Weitz has run his eponymous fund since its start back in 1986. Let's just say Weitz isn't afraid to make big bets. At the end of last year, for instance, half the fund's assets were in financial stocks and the other half were in cable and telecommunications stocks. Despite that racy streak, the no-load fund, which carries a 1.19% expense ratio, has been less volatile than its average peer. Also, its 20.5% 10-year annualized return beats 98% of its peers and leads the S&P 500 by more than three percentage points. How did the fund not make our list? Its minimum initial investment is a steep $25,000.

Turning to funds that

did

make our top 10, you'll find a chart-topper that rode utilities and energy stocks to unusual heights last year. The

(LMCPX) - Get Report

Lord Abbett Mid Cap Value fund, run by Edward von der Linde and Howard Hanson since its 1997 inception, trailed its average peer in both 1998 and 1999, but rang up a 53.3% return last year and that inordinate performance put the fund at the top of the list. Though it has solid risk scores, according to Morningstar, it would be unrealistic to expect these outsize gains soon. So far this year, the fund, which carries a 1.45% annual expense ratio, is down 0.3%, trailing more than 80% of its peers.

The most aggressive fund on the list might be the

(LLPFX) - Get Report

Longleaf Partners fund, run by Mason Hawkins, Staley Cates and John Buford. The trio only buys a company's stock when it's trading at least 40% below what they think the company is worth. Because they only hold 20 or 25 stocks, their bets on these battered stocks tend to be big. At the end of last year's third quarter, the fund's most recent portfolio report to Morningstar, it had more than 70% of its assets invested in its top-10 holdings. That's twice the concentration of its average peer and can lead to rocky returns because a cold for just a few of these companies could lead to pneumonia for the fund.

That said, the fund has beaten at least 60% of its peers over the past one-, three-, five- and 10-year periods. Its 19.6% 10-year annualized return beats the S&P 500 by more than two percentage points. The returns prove that picking a few stocks can work well, as long as you pick the right stocks. For instance, top holding

Waste Management

(WMI)

, which made up more than 15% of the fund at the end of the third quarter, gained more than 60% last year.

The

(MUHLX) - Get Report

Muhlenkamp fund, run by Ron Muhlenkamp since its 1988 launch, also has a unique style. Muhlenkamp essentially tracks consumers' discretionary spending trends and looks for companies that stand to benefit from them. He typically focuses on companies with solid returns on equity and a cheap stock price relative to other companies with similar growth, and his fund's 19.8% 10-year annualized return beats the S&P 500 by more than two percentage points and 90% of its peers. The fund's annualized expenses are 1.38%.

A cheaper fund with a more straightforward approach is the

(TRVLX) - Get Report

T. Rowe Price Value fund, which has a 0.92% expense ratio and has had manager Brian Rogers at the helm since its 1994 inception. Rogers is a strict value investor who looks for companies with good balance sheets and decent earnings growth that he thinks are trading below their true value. That's led him to focus on traditional value sectors like financials, but the fund's nearly 100-stock portfolio does give investors access to each industry sector.

Despite this low-thrills approach, the fund has performed. Its 17.7% five-year annualized return beats about 85% of its peers, according to Morningstar, and its record is more solid than

(TRMCX) - Get Report

T. Rowe's Mid-Cap Value fund, where David Wallack just took the reins at the end of last year.

There you have it: mid-cap value funds with above-average returns and below-average expenses.