Better Know a Stock Picker

Welcome, Fools, to part 37 of our several-thousand-part series, "Better Know a Stock Picker," which is loosely, but not too loosely, based on Stephen Colbert's "Better Know a District" from The Colbert Report.

Like Stephen and his thorough investigations into America's congressional districts, each week I take a look at a fund you may want to own. What's on tap this week?

American Century Focused Growth (AFSIX)

Expense Ratio

1.00%

Fund Size

$14.5 million

1-Year Return

7.17%

5-Year Return

N/A

10-Year Return

N/A

Sources: American Century

Top 5 holdings

Company

% of Assets

Schering-Plough (NYSE: SGP  )

4.71%

AT&T (NYSE: T  )

4.60%

Hewlett-Packard (NYSE: HPQ  )

4.57%

Emerson Electric (NYSE: EMR  )

4.48%

Baxter International (NYSE: BAX  )

4.44%

Sources: American Century

Meet Joe Reiland and Greg Woodhams
The fightin' team at American Century Focused Growth is led by co-managers Joe Reiland and Greg Woodhams, who came aboard when the fund opened for business a year ago last month. Focused Growth is up just 8.7% since, versus double-digit returns for the S&P 500.

Surely that record will have some of Wall Street's investapo pointing fingers. Don't join them. Focused Growth gets the nod in this column for the gravitas expressed by its managers, especially Woodhams. As he told Kiplinger's last year, "Just because a stock is pricey, that isn't going to keep us out." Talk about guts.

But it's not courage that convinced Champion Funds advisor Shannon Zimmerman to name Focused Growth a fund to watch in last February's issue. Instead, it was the team's willingness to concentrate assets into a small group of mostly large-cap stocks. That approach, Shannon reasoned, could deliver significant outperformance over time.

How he invests
A growth stock rally says he's right. Not that Reiland and Woodhams need one. Focused Growth seeks to invest in big stocks that have sturdy balance sheets and accelerating earnings growth.

That's how AT&T came to be a recent addition to the fund. Though the new Ma Bell had managed just 0.6% and 3.3% earnings growth in 2004 and 2005, respectively, 2006 brought better than 50% growth. Yowza.

Meanwhile, Reiland and Woodhams continue to add to above-average growers like PepsiCo (NYSE: PEP  ) and Polo Ralph Lauren (NYSE: RL  ) , both of which have recently produced higher returns on equity and capital. Eat that, Wall Street.

Is this fund for you?
Could Reiland and Woodhams team to be the next Peter Lynch? It's way too early to tell. But their willingness to stick it to the stockinistas is admirable.

And I'm not just talking about their stock picking. Focused Growth charges just 1% in annual expenses. That's remarkable for a new fund, and suggests that the team believes it will earn plenty of moola through market-beating performance. That's exactly the type of manager I'd invest with.

And Shannon agrees. That's why he's counseled Champion Funds subscribers to watch Focused Growth. Someday it could be a champ, though reaching that plateau won't be easy. Shannon's portfolio of winners is up by more than 14% on the benchmarks as of this writing. See them all with 30 days of free access to the service, which you can get by clicking here.

And that's today's profile. See you back here next week, fund nation. Good night.

For more Foolish coverage of the growth gurus:

  • Harry Lange is leading Lynch's Magellan to new growth.
  • T. Rowe Price's Bob Smith knows a winner when he sees one.
  • Can David Corkins return growth to the Janus Fund?

Think you can't beat the market with funds? Think again! The selections in Shannon Zimmerman's Motley Fool Champion Funds portfolio are up an average of 29% vs. just 15% for their comparable benchmarks. Ask us for an all-access pass to get an unfettered look at all of Shannon's picks, manager interviews, and model portfolios. Go ahead; it's free for 30 days and there's no obligation to subscribe.

Fool contributor Tim Beyers, who is ranked 1,746 out of more than 23,600 in our Motley Fool CAPS investor intelligence database, is a regular viewer of The Colbert Report. (Stay the course.) Tim didn't own shares in any of the companies mentioned in this article at the time of publication. All of his portfolio holdings can be found at Tim's Fool profile. His thoughts on mutual funds, Foolishness, and investing in general may be found in his blog. The Motley Fool's disclosure policy is always championship caliber.


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