Better Know a Stock Picker

Welcome, Fools, to part 49 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?

Leuthold Core Investment (LCORX)

Expense ratio

1.15%

Fund size

$1.7 billion

1-year return

10.24%

5-year return

13.65%

10-year return

12.36%

Sources: Leuthold Weeden Capital Management, Morningstar. Returns as of March 31.

Top 5 stock holdings

Company

% of Assets

AMR Corp. (NYSE:AMR)

1.66%

Continental Airlines (NYSE:CAL)

1.49%

UAL Corp. (NASDAQ:UAUA)

1.24%

Altria (NYSE:MO)

1.20%

Reynolds American (NYSE:RAI)

1.18%

Source: Morningstar. Data current as of March 31.

Meet Steve Leuthold
The fightin' team at Leuthold Core Investment is led by Steve Leuthold, who has been managing money for roughly four decades and, in that time, has abused the market. Indeed, since opening for business in November 1995, the Core Investment fund is up on the S&P by nearly two percentage points a year. Eat that, Wall Street.

And then get ready for dessert. Leuthold isn't much of a Wall Street guy. He operates out of his home state of Minnesota to this day. He's also been known to -- gasp! -- use a pen and a ledger in his research.

But don't let that fool you. Just because he hasn't invested in a hamster-wheel-powered spreadsheet, don't think he's out of touch. Far from it. Leuthold has a knack for seeing the big picture. He called the start of the great bull market that began in 1982, foresaw the market crash of 1987, and pegged the market bottom in October 2002.

He's also an obvious flagaphile. Leuthold helped to produce a quantitative study of the effect of money on the political process. Not surprisingly, he found that, of 435 Congressional contests, the candidate who raised less money won just 10. That's the sort of megamerican reporting that would make Stephen proud of Steve.

How he invests
Better still for investors, Leuthold puts those same quantitative skills to work in running Core Investment. He and his team of researchers study at least 28 different factors in screening for superior stocks.

Don't take that to mean Leuthold is rigid. Core Investment is what's called a hybrid fund, which means it has wide range in selecting investments. Some liken that to the flexibility hedge fund managers have. Leuthold, though, isn't so sure. Here's how he described Core Investment to Motley Fool Champion Funds advisor Shannon Zimmerman in a 2004 interview:

It's not like a hedge fund in that we don't use leverage. We are never more than 100% invested. We don't borrow any money. That is a common characteristic of hedge funds. Other than that, our focus is not to lose money. We have been pretty good at that over the years, including the very tough market of 2000-2002. We do look at alternatives other than stocks and bonds, so I guess we are, to some degree, like a hedge fund. But the big difference is we aren't leveraged.

Is this fund for you?
"Don't lose money." It just sounds right, doesn't it? It does to me, and to Shannon Zimmerman, who recommended Core Investment to Champion Funds subscribers in November 2004. Sadly, the fund closed to new investors shortly thereafter.

No need to worry, though. Leuthold Select Equities (LSEQX), just a year old and also run by Leuthold, is proving to be a market-beater, up more than 4% on the S&P 500 year-to-date. Though the fund's 1.85% expense ratio is too rich for me right now, I'm confident that it will decline as more investors bet on Leuthold. Keep Select Equities on your watch list, Fool.

Want more ideas? Get 30 days of free access to Champion Funds right now. Shannon's picks are up more than 14% on their respective benchmarks, and there's never an obligation to subscribe.

Till next week, fund nation. Good night.

For more Foolish coverage of hybrid funds:

Fool contributor Tim Beyers, who is ranked 3,887 out of more than 31,000 rated investors 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. Tim's portfolio holdings can be found at his 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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  • Report this Comment On June 10, 2008, at 8:56 PM, barebkryder wrote:

    WOW! WHERE DID THIS STEVE GUY COME FROM!!! SOUNDS LIKE A TRUE COWBOY TO ME!! KEEP UP THE GREAT WORK!

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