Great Lone Ranger Funds

published 1 December 2007

There's something special about single-fund shops -- the good ones, anyway. I have to qualify that because you can find some of the craziest managers running one-fund outfits,hoping to fool enough people into handing their money to a guy with a wacky investment strategy who runs the whole kit and caboodle from his garage. (Hint: If he says he derives his strategy from studying the behavior of bees, as one fund manager actually did, run away.) The good one-fund shops want to manage money, not people. They can focus on making their clients' money grow alongside their own. They're not interested in building an empire.

Fully focused. With but one fund to tend, the manager has no distractions, no need to hit a blowout number to maximize a bonus, and no conflict of interest that would lead him or her to sell out shareholders to a market timer, a marketing whiz or another individual with an agenda not aligned with the customer's.

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Bob Torray founded his investment firm in 1972 and Torray fund (symbol TORYX) in 1990. Doug Eby joined him in 1992 -- so Eby has a "mere" 15 years' worth of experience. Torray and Eby hate to lose clients' money, so they take a long-term, value approach. The fund held up beautifully in the 2000Ð02 bear market, losing just half as much as the market as a whole. If you value that kind of downside protection over rally potential, then this fund could be a good fit for you. As you'd expect from a good one-fund shop, the managers do a fine job of aligning their interests with those of shareholders. They invest a lot of their own money in the fund, keep expenses low, try to minimize taxes and write intelligent shareholder letters.

Harry Burn and Gibbs Kane got started a little later than Bob Torray. They founded their firm in 1978 and have run Sound Shore fund (SSHFX) since its inception in May 1985. John DeGulis, an analyst at their shop since 1995, was made a co-manager of the fund in 2003. They employ a classic value style in which they look for companies trading well below their historic valuations and then try to find the ones that can come back. Current favorites are General Electric and Berkshire Hathaway. Once again, you get low turnover, a focused portfolio and modest costs. But the best sign of all is that the profit-sharing pool for the firm's employees goes straight into the mutual fund. They eat their cooking.

Nobody rides bandwagons at Jensen fund (JENIX). This fund's results have been tepid over the past five years because until recently, the large, steadily growing companies Jensen favors were unloved. However, I kind of like it when I find good managers using an unloved strategy. As the markets get back to steady growers, this fund will shine. Among the positives at Jensen: Long-term performance is still strong, expenses and trading costs are low, and taxable distributions are small.

Presidio fund (PRSDX) is a bit of a departure in that its manager is a little younger and has the help of only one analyst. So maybe it is run out of a garage, but I can assure you that the manager isn't crazy. Kevin O'Boyle produced excellent results during his nine years running Meridian Value before striking out on his own and starting a fund two years ago. He looks for roughed-up stocks that have a shot at rebounding. That's a tricky business, but he does it well. With just $74 million in assets, this small fund, whose style is a mixture of value and growth, figures to have plenty of room to maneuver.

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