Better Know a Stock Picker

Welcome, Fools, to part 28 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?

Hartford Capital Appreciation (ITHAX)

Expense ratio

1.26%

Fund size

$14.6 billion in assets

1-year return

16.68%

5-year return

11.76%

10-year return

16.75%

Sources: The Hartford, Morningstar

Top 5 holdings

Company

% of Assets

Medtronic (NYSE: MDT  )

2.7%

General Electric (NYSE: GE  )

2.6%

Toyota Motor (NYSE: TM  )

2.4%

Samsung Electronics

2.2%

Walt Disney (NYSE: DIS  )

2.2%

Source: The Hartford

Meet Saul Pannell
The fightin' team at Hartford Capital Appreciation is led by Saul Pannell, who, along with understudy Frank Catrickes, will go anywhere to find a bargain. And I mean anywhere.

Rewind to 1998. Everything is expensive, even razor maker Gillette, which Forbes reports was trading for 47 times earnings at the time. What does Pannell, just 20 months into his reign at Capital Appreciation, do? He buys a big chunk of convertible preferred shares of out-of-favor railroad Union Pacific (NYSE: UNP  ) .

Bold, you say? Heroes always are. As Pannell told TheStreet.com in 2002, he seeks to buy stocks that are "obscure and controversial." Google (Nasdaq: GOOG  ) is hardly obscure, but it is extraordinarily controversial. It's also one of Capital Appreciation's top 25 holdings. Eat that, Wall Street.

How they invest
Of course, there's more to Capital Appreciation than defying the dogma of the Street's investapo. Pannell has said in many interviews over the years that his aim is to buy what Wall Street is ignoring in exchange for what he believes will result in a 25% or better gain within 12 months.

That Pannell has more than doubled the return of the S&P 500 over the past 10 years speaks to how often he's found the quick bump. And last year was no exception. Pannell singled out fast-food junkie Yum! Brands (NYSE: YUM  ) for its expansion into China during an August 2005 interview with TheWashington Post. The stock is up 29% over the past 52 weeks.

Is this fund for you?
So can Pannell deliver like Peter Lynch? I love his flexible approach. It's somewhat reminiscent of Robert and Jeff Bruce's fund, but with a lower risk profile, thanks to Pannell's value bias. Color me thoroughly unsurprised that Morningstar named him one of its 10 best fund managers.

Pannell and Catrickes also inspire confidence for their willingness to recycle winners. Samsung, which Capital Appreciation has held for at least the last four years, and which now accounts for 2.2% of the portfolio, comes to mind. For Lynch, backing up the truck on his best ideas resulted in a $500 million gain.

There's really only one thing wrong with Hartford Capital Appreciation: It carries a sales commission and multiple share classes. That's a shame. (Find out why.)

But it's also not the end of the world; several similarly excellent but really cheap blended funds exist for you to buy today. One, which joined the Motley Fool Champion Funds portfolio in the April 2005 issue, has busted the index by more than 14% and is still going strong. (It's also one of several winners for advisor Shannon Zimmerman; click here to get 30 days of free access to the entire portfolio.)

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

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 28% vs. just 18% 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 buy.

Fool contributor Tim Beyers, ranked 1,480 out of 15,162 in Motley Fool CAPS, is a regular viewer of The Colbert Report. (Stay the course.) Tim didn't own shares in any of the stocks or funds mentioned in this article at the time of publication. Get the skinny on all of the stocks in Tim's portfolio by checking his Fool profile. Disney is a Stock Advisor pick. The Motley Fool's disclosure policy is always championship caliber.


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