The bear market has been particularly harsh for value funds. The average large value fund dropped 40% during the year ending April 1, more than 3 percentage points worse than large growth, according to Morningstar.

Nervous investors have been dumping value funds. But before you sell, keep in mind that some value funds have proved relatively resilient. Such stable performers could be sound choices for investors seeking to build portfolios that can weather hard times.

For value portfolio managers, much of the trouble can be traced to a few sectors. Because they favor cheap stocks, many value funds have traditionally held big stakes in financial and energy companies, industries with low price-to-earnings ratios that have been clobbered lately. Big financial holdings hurt such premier value funds as Longleaf Partners ( LLPFX), which lost 46% in the past year. Other noted value funds that lost more than 45% include Columbia Value & Restructuring ( UMBIX), Dodge & Cox Stock ( DODGX) and Legg Mason Value ( LMVTX).

While many star managers sank, some funds avoided the worst damage. Among the leaders were funds that dodged troubled banks and focused on high-quality companies with reliable earnings. Such stocks proved relatively stable as investors sought safety during the downturn.

One of the top value performers of the past year was Yacktman Fund ( YACKX), which lost 28%, outpacing the S&P 500 by more than 10 percentage points. Portfolio manager Donald Yacktman bought some steady blue chips that had sunk into value territory, including Microsoft ( MSFT) and Procter & Gamble ( PG).

Yacktman's strong showing was hardly a fluke. Holding steady companies, the fund produced double-digit annual returns from 2000 to 2002, years when the S&P dropped deeply into the red.

While Yacktman outpaced the field last year, some of the worst returns went to deep-value funds, which focus on stocks selling at big discounts. These contrarians often buy troubled companies, and that was a losing strategy at a time when panicked investors sought security.

One of the worst deep-value performers was DWS Dreman High Return Equity ( KDHAX), which lost 49% of its value. Before the bear market began, portfolio manager David Dreman recorded a compelling long-term record by focusing on unloved stocks, including many with single-digit price-to-earnings ratios. Following his traditional strategy last year, Dreman loaded up with collapsing financial stocks, such as Washington Mutual ( WM) and Freddie Mac ( FRE). He still has 20% of assets in financials, including stakes in Citigroup ( C) and Bank of America ( BAC).

Can Dreman outpace Yacktman over the next five years? Perhaps. In the past, deep-value funds like Dreman's have often roared back from periods of underperformance. But many cautious investors may prefer sticking with managers who focus on high-quality companies. Such stocks are likely to deliver a smoother ride at a time when many investors cannot tolerate more shocks.

For a steady fund, consider GAMCO Westwood Equity ( WESWX), which fell 0.8% annually during the past five years, beating 96% of large value funds. Portfolio manager Susan Byrne wants healthy companies that are reporting improving returns on equity.

A diehard value investor, Byrne typically takes companies that sell for below-average price-to-earnings ratios. That normally prevents her from owning blue-chip growth companies. But now that prices have hit rock-bottom levels, she has bought such familiar names as Johnson & Johnson ( JNJ) and McDonald's ( MCD).

Another fund that focuses on steady companies is American Century Equity Income ( TWEAX), which outpaced 99% of large value funds in the past year and 97% over the past five years. The fund buys well-capitalized companies that are leaders in their industries. A top holding is garbage hauler Waste Management ( WMI), which enjoys relatively steady sales because people always take out the trash regardless of how the economy fares.

A relatively tame choice is Aim Diversified Dividend ( LCEAX). Portfolio manager Megan Walsh looks for companies that have the financial ability to increase their dividends over the long term. The cautious approach has enabled the fund to limit losses in downturns and outdo 28% of large value funds during the past five years.

Insisting on companies with strong balance sheets, Walsh has avoided troubled banks and held stable consumer stocks, including Kraft Foods ( KFT). A big holding is Automatic Data Processing ( ADP), which manages payrolls for large employers. Despite shrinking workforces, the company's revenue should be fairly steady because employers must still send out paychecks.

Stan Luxenberg is a freelance writer who specializes in mutual funds and investing. He was formerly executive editor of Individual Investor magazine.

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