Solidly Managed Funds

by Alan Lavine and Gail Liberman

Which mutual fund managers are outperforming the stock market, based on risk versus return?

Morningstar Inc., the Chicago-based mutual fund research firm, uses a complex measure to figure this out.

The company cites several funds. But beware. Over the short term, the funds can underperform or outperform their respective benchmarks, which are stock indexes. Nevertheless, its recommend funds include:

• Constellation Sands Capital Select Growth. The fund invests in large company growth stocks. The fund owns high-priced stocks like Starbucks and Google. But the manager does not invest unless he thinks corporate earnings will grow longer term.
• Hartford Capital Appreciation. The fund invests in undervalued blue chip stocks as well as growth stocks selling at reasonable prices.
• ICAP Select Equity. The fund invests in a limited number of stocks based on the economic outlook of the company and its industry. Today the fund invests in energy and cyclical stocks that do well during different stages of the economy.
• Vanguard Strategic Equity. The fund is run by an outside manager that uses computer models to pick undervalued growth stocks.
• Schneider Value. The fund invests in beaten down small, mid-size and large companies.
• Columbia Acorn. The fund invests in undervalued small company stocks. It has a strong long-term track record.
• Royce Value. The fund invests in undervalued small company stocks. It also has a strong long-term track record.
• Northern Small Cap Value. The fund uses quantitative methods to pick undervalued stocks in a large number of small companies.

Alan Lavine and Gail Liberman are husband-wife personal finance columnists, journalists and authors. They are the authors of "Rags To Retirement," published by Alpha Books. Their columns appear in newspapers throughout New England and the Southeast, as well as online. Their commentary on mutual funds and personal finance is carried by 200 radio stations nationwide every Sunday over Business News Network's Charles DeRose Financial Advisor Show. Al and Gail’s new book is "Rags To Retirement:  Stories from people who retired well on much less than you think," published by Alpha Books.

More articles by Al and Gail can be found here.