Waddell & Reed Advisors New Concepts (UNECX)
With 10 years at the helm of a stock fund -- the $1.6 billion Waddell & Reed Advisors New Concepts fund -- Kimberly Scott, 51, has a bit more seasoning than the other fund slingers on our list. Which is to say, she's been around long enough to weather not just one great bear market but two.
After years of toiling in obscurity as a stock analyst, Scott got her start managing money in early 2001 -- amid the fallout of the bursting of the dot-com bubble. As a technology analyst, she had already been skeptical of many of the Nasdaq highfliers and was quick to dump the most vulnerable tech stocks in her new portfolio. But then Scott stayed on the sidelines too long, she admits. (Around 10% of the fund was in cash when stocks started zooming in early 2003.)
Eventually, though, she would get the chance to learn from that mistake. When the recent great bear market ended in early 2009, she jumped back into the market with more alacrity. Through these past 10 years of boom and bust, indeed, her fund has averaged annual returns above 6%.
When it comes to stock picking, Scott often takes inspiration from the homefront. Her daughters shop at the trendy retailer Lululemon Athletica (LULU, news) watch movies on Netflix (NFLX, news) and eat at Chipotle Mexican Grill (CMG, news). Now all three companies are in the portfolio she manages.
Still, not all her picks are trendy. Take, for example, the unloved automobile industry, where Scott is hot on lesser-known names like Harman International Industries (HAR, news) a Stamford, Conn., manufacturer of car audio systems, and PPL (PPL, news) a Charlotte, N.C., engineering firm that makes a component of electric car batteries.
"We look for companies that are solving problems," she says.
Fidelity Small Cap Discovery (FSCRX)
Chuck Myers established his investing chops even before collecting his high school diploma. As an 18-year-old senior, he took second place in a nationwide investing competition for adults. Although he was phoning in "paper trades" for a phantom brokerage account in that competition, in real life he was already trading stocks in his college savings account.
Now 35, Myers recently wrapped up his first five years managing the $1.9 billion Fidelity Small Cap Discovery fund. He has turned a lot of heads straight out of the gate, with average annual returns above 9% -- putting the value-oriented investor in the top 2% of small-cap stock managers.
That's despite a rough patch early in his tenure, in late 2007, when he lagged most of his peers. What's changed? He sought out some wise counsel. Myers, who had been putting too much weight on a few stocks and sectors, sat down with some mentors at Fidelity who helped him learn how to construct a less-top-heavy portfolio.
Myers has seemed to need less advice on how to spot a bargain. The effervescent manager can barely sit still while describing why he is drawn to the investing world's small fry. Smaller companies, he says, are "more agile" and have the capacity, at least, to grow exponentially in size.
Right now nearly all his attention is on U.S. companies: 96% of his portfolio is in domestic stocks. He's investing the remainder in Japan. Myers thinks it's "crazy" how undervalued Japanese equities are, particularly small consumer stocks.
Chad Meade and Brian Schaub
Janus Triton (JGMAX)
Chad Meade and Brian Schaub began their financial careers as stock analysts a decade ago, during the dot-com bust. That experience persuaded the investing duo to focus on stocks with a "sustainable competitive advantage" in their industries. Schaub said.
That strategy has served them well over the five years they've co-managed Janus Triton. During their tenure, the fund has returned more than 11% a year on average, ranking it among the top 1% of small-cap growth-stock funds. That's despite losing 40% in 2008, in line with other funds in the same investing category.
The stocks in Triton's $1.9 billion portfolio generally have a higher debt level than the category average, cautions Morningstar analyst Kathryn Young, which might make them more vulnerable in a punishing market. (Schaub says that debt "used appropriately and in moderation can be a good thing for equity holders.")
Notably, once they find a stock they like, they stick with it -- often holding on to small-fry firms even as they grow into midsize ones or until their market capitalizations reach $10 billion.
Compared with its fund peers, Triton has low turnover, with an average holding period of three to five years. Says the 34-year-old Meade, "We think of ourselves as investors, not traders."
This article was reported by J. Alex Tarquinio for SmartMoney.
VIDEO ON MSN MONEY
Hilarious. All the performance numbers for these funds are down for the day. Four out of five are down a greater percentage than the S&P 500 index. Is this the comedy channel?
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[BRIEFING.COM] The major averages ended the midweek session with slim gains after showing some intraday volatility in reaction to the release of the latest policy directive from the Federal Open Market Committee. The S&P 500 added 0.1%, while the relative strength among small caps sent the Russell 2000 higher by 0.3%.
Equities spent the first half of the session near their flat lines as participants stuck to the sidelines ahead of the FOMC statement, which conveyed no changes to the ... More
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