Kip 25

This Kiplinger 25 Fund Continues Its Long, Winning Record

Meridian Growth's managers did well by scooping up high-quality stocks on the cheap after the market tumbled.

More than two years after the stock market bottomed in March 2009, Rick Aster, co-manager of Meridian Growth (symbol MERDX), is still dining off investments he made during the market crash. Aster, who launched Meridian, a member of the Kiplinger 25, in 1984, says the market dislocation in 2008 and early 2009 allowed him and his co-manager, William Tao, to pile into shares of high-quality, fast-growing, midsize market leaders that they had always thought were too expensive. (See how all the Kiplinger 25 funds performed since the bottom: Kiplinger 25 Funds Run Up with the Bull.)

Many of those investments were in technology companies, particularly software developers. Aster says he is holding on to a number of them because they match his criteria: They generate a high return on capital, produce at least 40% of revenues abroad, have solid balance sheets and are reasonably priced. He also likes that software outfits are relatively unaffected by rising commodity prices.

For instance, during the market collapse, he scooped up shares of Solera Holdings (SLH), which sells software for processing auto-insurance claims; Blackbaud (BLKB), which specializes in software for nonprofit organizations; and Trimble Navigation (TRMB), supplier of global positioning systems for industries such as aerospace, construction and agriculture.

Not that Aster, who holds his stocks for three years on average, is resting on his laurels. In recent months he's purchased, among other stocks, Jones Lang LaSalle (JLL), a global property-management and leasing company that he figures will be helped by improving employment and economic expansion; Pall Corp. (PLL), a maker of water-filtration systems for a wide variety of industries, which should get a boost from more-stringent government regulations; and Waste Connections (WCN), which collects and dumps garbage. "Garbage is a good, stable business with large barriers to entry," says Aster.

The record shows that Aster, who is 70 and says he has no plans to retire, is one shrewd stock picker. Over the past ten years through March 22, Meridian Growth returned an annualized 10.6%, an average of five percentage points per year better than a basket of mid-cap growth funds. That was good enough to land the fund in the top 1% of the category. Over the past year, Meridian Growth gained 26.2%, nearly six points ahead of the category average.

KIPLINGER'S STOCK MARKET MADNESS 2011: Join fellow investors in picking the best stocks to own for the next three years.

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