Better Know a Stock Picker

Welcome, Fools, to part 55 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?

Top 5 stock holdings

Meet Greg McCrickard
The fightin' team at T. Rowe Price Small-Cap Stock is led by Greg McCrickard, who has led the fund for nearly 15 years. And he's crushed the benchmark Russell 2000 in that time. (Here's the visual.)

McCrickard obviously has an eye for bargains. Look at his top holdings. In May, Liberty Mutual announced plans to acquire insurer Ohio Casualty for $2.7 billion, while U.K. defense contractor BAE pledged $4.5 billion for Armor Holdings. Both deals closed recently and richly rewarded Small-Cap Stock's shareholders.

Don't take that to mean McCrickard hunts for buyout candidates. Instead, he sticks it to the stockinistas by taking a broader view of the markets and the economy. For example, in 2003, McCrickard told the International Herald Tribune that oil and gas explorers would do well.

And then he backed up that claim with cash. In the year between June 30 of 2003 and 2004, McCrickard upped his exposure to energy stocks from 6.4% to 7.4% of Small-Cap Stock's assets.

National Oilwell (NYSE:NOV) was one of his biggest bets. He doubled his exposure to this maker of oil and gas exploration equipment and then watched as the stock rose 120% before the company with Varco in March of 2005, at which point McCrickard sold. Eat that, Wall Street.

How he invests
That's how it is for McCrickard; he's a small-cap bargain hunter. His favorites are companies such as Consolidated Graphics (NYSE:CGX), which he singled out in the same Herald Tribune interview in which he called the rally for oil and gas firms. The stock is up roughly 150% since.

What's the process behind these superstantial returns? The fund's marketing material explains that McCrickard seeks small-cap growers that are cheap by valuation standards, thereby reducing the risk of excess volatility.

Smart. Volatility can be a powerful enemy in the great game of investing, unless you maintain a healthy reserve of cash to take advantage of the buying opportunities created by Mr. Market's mania.

Nevertheless, McCrickard takes big risks when doing so seems appropriate. Palm (NASDAQ:PALM) is a recent buy, for example. (Here's why that's a risky proposition.)

Is this fund for you?
McCrickard's strategy isn't that much different from my own, though he's far more experienced than I. As such, I'd be willing to give him a portion of my portfolio assets to invest. You may feel similarly. Too bad we can't. T. Rowe Price has closed Small-Cap Stock to new investors.

Disappointed? Don't fret; there are plenty of small-cap superstars in Shannon Zimmerman's Motley Fool Champion Funds portfolio. More than 79% of his picks are beating their respective benchmarks. Take advantage by accepting a 30-day free pass to the service.

And till next time, fund nation, good night.

For more Foolish coverage of small-cap superstars:

• Charlie Dreifus may have finally turned the corner.
• Chuck Akre's poker face loots the market every time.
• Chuck Royce is the original small-cap superstar.

Palm is a Stock Advisor pick.

Fool contributor Tim Beyers 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. Find Tim's portfolio here and his latest blog commentary here. The Motley Fool's disclosure policy is championship-caliber.