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Mutual Funds

10% Or Bust

Finally, we asked Morningstar to screen for funds that consistently churn out double-digit returns. Because of the 2002 disaster, no fund more than six years old was able to jump the 10% hurdle in every year of its existence. But 15 funds with at least seven full calendar years of operation missed double-digit gains just that once.

Wasatch Micro Cap has the best batting average. It returned 10% or more in ten of its 11 full years, as well as an 11% gain in the first half of 2007, for a 92% success rate. Its only "failure" came in 2002, when it sank 14%. The fund (WMICX) is closed to new investors.

Most of the funds in the one-year-miss club specialize in small, midsize or foreign firms. Among the well-known names are Longleaf Partners International (LLINX) and Oakmark Global (OAKGX). Longleaf's managers invest only if they can buy a stock for at least 40% less than their estimate of the firm's true worth, and they hedge the fund's currency exposure. The fund lost 17% in 2002 but has gained an annualized 16% since its launch in October 1998. It rose 15% in the first half of '07. Oakmark usually doesn't hedge currency, but it takes a similar approach to stock selection. It lost only 2% in 2002 and gained 11% in the first half of '07.

Selected funds that delivered double-digit returns in at least 80% of calendar years and at least 5% in the first half of 2007:

Wasatch Micro Cap 12/11
Security Mid Cap Value 10/9
Royce Select 9/8
Longleaf Partners Intl 9/8
Turner Emerging Growth* 9/8
Janus Mid Cap Value 9/8
Oakmark Global* 8/7
Meridian Value 13/11
Olstein All Cap Value 12/10
Royce Heritage 12/10
SOURCE: ©2007 Morningstar Inc.