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Small- and mid-cap value funds are easy to ignore, but you do so at your own peril.

Like most value funds, they hunt for bargains on Wall Street. Because they typically focus on unloved stocks of smallish and obscure companies, they don't exactly stand out. That said, a diversified portfolio would have a combined 15% of its money in these funds, using the broad

Wilshire 5000 Index

as a yardstick. Then there's the fact that they would've stemmed the tide of losses that left most investors soaking in red ink.

Over the past 12 months, the average mid-cap and small-cap value funds are up 17.5% and 19.9%, respectively, compared with a 6.7% loss for the

S&P 500

, according to

Morningstar

. The reason: Their price-conscious approaches lead to a modest 10% average stake in the tech sector, which has led most aggressive growth funds to steep losses.

All Values Mid and Small
Mid-cap and small-cap value funds have routed
the broader market in the past 12 months

Source: Morningstar. Annualized returns through May 9.

Because growth funds' heady, tech-driven returns in recent years made them top-sellers in 1999 and 2000, there are probably a slew of investors who are in the market for value funds to balance out their portfolios. Earlier this week, the Big Screen

sifted the big-cap value bin and today we're combing through the mid- and small-cap value packs.

To fish out some solid choices, we screened out any funds that trailed their peers over the past one- or five-year periods or had a manager who'd held the reins for less than five years, according to Morningstar. We also yanked out funds with above-average expense ratios and an investment minimum above $10,000. Here are the top-five mid-cap and small-cap value funds that made our cut, ranked by their five-year annualized gains.

Let's start at the top, with mid-cap value funds.

On this list you'll find conventional value funds that strictly sift dirt-cheap stocks for hidden gems, but also others that march to their own drummer. Two examples of the latter are the no-load

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Dreyfus Mid-Cap Value fund and the no-load

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Muhlenkamp fund.

Peter Higgins, manager of the

Dreyfus

fund since its 1995 inception, focuses on stocks that are cheap vs. their historical valuations where he also sees a catalyst for growth. Because he's not focusing strictly on stocks that are the cheapest in the market, but those that are simply cheap vs. their usual valuation, Higgins has the flexibility to shop in the tech sector. At the end of last year, he had 24% of the fund's money in tech stocks, more than twice his average peer's tech stake, according to Morningstar.

That might lead to some risks, but it hasn't hurt his returns. The fund beats at least 85% of its peers and the S&P 500 over the past one-, three- and five-year periods.

Ron Muhlenkamp also takes a distinct tack with his eponymous fund. Instead of beginning with stock analysis, he starts with the big picture. He interprets macroeconomic trends and consumer spending patterns, trying to discern what sectors might be standing in the path of significant demand. For most of the past decade, he's focused on financials and companies like

Home Depot

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, figuring low interest rates and low unemployment would leave consumers with money to spend on both financial services and home improvement.

The fund might not be easy to shoehorn into a label, but it has beaten at least 75% of its peers and the S&P 500 over the past one-, three-, five- and 10-year periods. The fund's 18.7% 10-year annualized gain beats 94% of its peers and beats the S&P by more than 3 percentage points.

A more traditional mid-cap value fund on our list is the no-load

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Tweedy, Browne American Value fund.

The fund, run by veterans Chris Browne, William Browne and John Spears, typically focuses on stocks of companies they think are trading at a discount to what the three managers believe to be their intrinsic value. The fund consistently beats its peers over the past one-, three- and five-year periods, according to Morningstar.

The top-three funds on our small-cap value fund list each take a distinct path, but it's hard to argue with where they've led their shareholders.

The chart-topping

(TCSVX)

Turner Small Cap Value fund -- Clover Small Cap Value before its addition to the Turner lineup this month -- focuses on solid stocks that look cheap relative to their sector peers. That's led to a financial-stock focus and might not sound like an earth-shattering strategy, but co-managers Lawrence Creatura and Mike Jones have rung up solid gains since the fund launched in 1996. The fund's 17.8% five-year annualized gain tops 90% of its peers and leads the S&P 500 by more than 2 percentage points.

The $8.5 billion

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Fidelity Low-Priced Stock fund is far and away the category's behemoth, but its vast assets haven't really hamstrung Joel Tillinghast, who's been calling the shots since the fund launched in 1989.

Tillinghast focuses on stocks with a share price south of $35 that he believes are cheap. Due to the fund's girth, he holds more than 700 stocks and trades infrequently, but that slow and steady approach hasn't hurt returns much. The fund beats at least 70% of its competitors over the past one-, three-, five- and 10-year periods, according to Morningstar.

In running the

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Royce Total Return fund, co-managers Chuck Royce and Whitney George have simply sifted the market for stocks that are both cheap and paying a dividend. They've typically had about half the fund's money in industrial and financial stocks and beaten their average peer over the past one-, three- and five-year stretches.

In addition to the funds that made our cut, we've singled out two solid funds in each category that slipped through the cracks, but deserve consideration nonetheless.

Wally Weitz's no-load

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Weitz Value fund didn't make our list because it carries a $25,000 minimum investment, but his track record is still hard to ignore. Weitz's searches for companies that are cheap relative to their cash flows often lead him to the cable and financial-stock sectors. He has run the fund since its 1986 inception and beats at least 75% of his peers over the past one-, three-, five- and 10-year periods, according to Morningstar.

The no-load

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Oakmark fund lags its peers over the past three- and five-year periods, but don't blame lead manager Bill Nygren because he and colleague Kevin Grant only took the reins last year. Nygren dusted 98% of his peers running the

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Oakmark Select fund over the past three years and that fund closed to new investors a week ago. The Oakmark fund, which boasts a 34.3% one-year gain that beats 88% of its peers, is a way you still can get access to Nygren's skill.

Two other small-cap value funds you might consider are the no-load

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Third Avenue Value fund and the broker-sold

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Franklin Balance Sheet fund.

In running the Third Avenue Value fund, veteran manager Marty Whitman combs the market for companies whose stock is trading at half his estimate of the company's true value. At the end of the first quarter he had 43% of the fund's money in financials and 31% in tech stocks. The fund missed our cut because it lagged its peers over the past year, but it still beats the S&P 500 over the past one-, three-, five- and 10-year periods, according to Morningstar.

The Franklin fund, run by Bruce Baughman and Bill Lippman since its 1990 inception, considers only stocks whose price-to-book-value multiple ranks in the cheapest 20% of small-cap stocks. They had almost a third of the fund's money in financial stocks at the end of the first quarter and have beaten their peers over the past one-, three-, five- and 10-year periods. The fund made our cut, but its five-year annualized gain didn't rank in the top five of small-cap value funds. The Franklin fund didn't make our cut because it's one-year return lagged the category average.

Well, there you have it, a bevy of choices for the value-hungry among us.