Know Your Moneymaker

It's no secret that I'm a stock jock. But there's something to be said for creaming the market while taking a safer path.

Superior funds run by superior, moneymaking managers will do that. Let's look at one you've probably never heard of: LeutholdCore Investment (FUND: LCORX  ) , which counts Prudential (NYSE: PRU  ) , Rio Tinto (NYSE: RTP  ) , and Phelps Dodge (NYSE: PD  ) among its top holdings. The fund is up 26.6% since it was singled out in the November 2004 issue of Champion Funds, compared with just 11% for S&P 500-tracking SPDRs (AMEX: SPY  ) . But this is no short-term anomaly: Leuthold Core Investment has trounced the market by nearly 9 percentage points over the past five years, according to Yahoo! Finance.

Follow the leader
Finding such funds can't be easy, right? After all, haven't we said for years that funds lag stocks, and miserably so? Yes and yes. That's why it's so important to stick with the champs. And that begins with knowing the guy at the top. Is he some quick-hit young whippersnapper who will make a fortune in management fees, only to disappear when his investing style goes out of favor? Or is he a leader bent on superior performance that is built to last? Let's put fund manager Steven Leuthold to the test using a quick Google search.

A championship manager ...
There's good news from the first: Leuthold, based in Minnesota, has been managing money for nearly 40 years. His approach is purely quantitative; he studies 28 different factors in screening for superior investments. And then he sticks with what works. Indeed, he's been quoted as saying that, as far as investing goes, "discipline is always better, in my opinion."

Leuthold also understands the power of compounding. In a January 2003 article in the Dallas Morning News, he illustrated how a $2,000 investment for a newborn that earns 12% per year, with dividends reinvested, would be worth more than $3 million by retirement.

Leuthold isn't greedy, either. He has limited the number of brokerages able to resell shares in the fund, thereby tightening access to new money and forgoing higher management fees.

Finally, he's anticipated trends nicely. For example, he was buying precious metals in abundance in 2003. To understand how smart that was, consider that gold is trading today for more than $200 more per ounce than it did in January of 2003. So, while he thrives on quantitative investing, Leuthold also will swing for the fences on behalf of investors when the odds favor doing so.

... And a concerned citizen
Outside of his funds, Leuthod has been politically active. He's a well-known deficit hawk who's been critical of overspending by both parties. He also helped to produce a fascinating quantitative study of the political process. You can find it here (opens a pdf file). I won't spoil the details except to say that he exposes the influence of lobbying by showing how, of 435 House seats, only 10 were won by candidates that raised less than their competition. That's a timely revelation, to be sure.

Who'shelping you get rich?
What did we learn? First, Leuthold has been at the investing game for decades, and he has a process that works. Second, his firm carries his name, so his personal reputation is on the line if he loses money. Third, he appreciates the power of compounding and is prone to helping investors amass wealth without creating high fees or an undue tax burden. And, finally, he has deep principles and an appreciation for fairness.

All exemplary qualities. Put that alongside his fund's performance over the past half-decade and we've every reason to believe Champion Funds advisor Shannon Zimmerman has found a long-term winner here. And it joins an illustrious group. To see all the funds that Shannon believes in as much as Leuthold (and for those scoring at home, Shannon's 35 fund selections are up 19% vs. 9% for the competing indexes), take a risk-free 30-day trial to Champion Funds today.

Fool contributor Tim Beyers is still a stock jock but is liking funds more and more every day. Blame Shannon. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what is in his portfolio by checking Tim's Fool profile. The Motley Fool has an ironclad disclosure policy.


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