Despite recent setbacks, some of the top deep-value funds boast strong long-term records. Over the past 15 years, Third Avenue Value returned 6.8% annually, outdoing 70% of peers. Third Avenue takes only companies with strong balance sheets and good growth prospects. In recent years, the fund has placed a big bet on Hong Kong property companies. The stocks were slammed last year when the Chinese government began limiting bank lending and trying to cool red-hot property markets. Third Avenue portfolio manager Ian Lapey argues that his holdings still represent attractive bargains. The companies have little debt and rich profit margins, he says. Leasing income has been growing at double-digit annual rates. At current levels, the share prices sell for big discounts to the value of assets, he says. A favorite stock is Cheung Kong Holdings (CHEUY.PK), which develops property in Hong Kong and China. Lapey says that the company has been shrewd about buying and selling real estate. Last year, Cheung Kong sold commercial real estate in China at big profits. The company has fat profit margins on its property development, and the leasing income has been growing at an annual rate of 12%. One of the steadier deep-value funds is Mutual Shares. The portfolio managers limit risk by buying solid companies selling at very low prices. In addition, the fund typically keeps 10% to 20% of assets in cash and bonds. That provides some cushioning during periods when deep-value stocks collapse. Among the fund's unloved holdings are tobacco stocks, including Altria ( MO), the producer of Marlboro cigarettes, and British American Tobacco ( BTI), which makes the Lucky Strike and Kool brands. While U.S. cigarette sales are declining, the tobacco companies can deliver steady earnings by raising prices and cutting costs. The companies generates rich cash flows and pay healthy dividends. Another holding is UnitedHealth Group ( UNH), an insurer. The stock suffered when investors worried about the impact of President Obama's reform legislation on health spending. But the company has been reporting growing revenues.