Clipper Relaunched

The board of directors of Clipper fund rocked the boat late last year by hiring Davis Selected Advisers to run the fund. In a rare departure from business as usual, directors rejected the wishes of the firm that owned Clipper's former management company to appoint managers affiliated with the firm.

Chris Davis and Ken Feinberg have rebuilt Clipper to look more like Selected American Shares (see The 25 Best Mutual Funds, May). The funds share four of five top holdings in common: American Express, ConocoPhillips, Costco and Tyco. The key difference between them: As of June 30, Clipper held only 20 stocks, and Selected held 74.

In both funds, Davis and Feinberg invest in large, growing companies selling at reasonable prices. Their approach differs somewhat from that of previous manager Jim Gipson, who searched for stocks selling at substantial discounts to a company's estimated value. Another difference: Gipson would often let cash build up if he couldn't find enough cheap stocks. The Selected duo plan to run the fund fully invested.

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Because of its concentration in fewer stocks, Clipper (symbol CFIMX; 800-432-2504) will almost certainly be more volatile than Selected (SLASX; 800-243-1575). If you have a high degree of confidence in Davis and Feinberg -- and we do -- the extra risk may be well worth taking.