One of This Year's Best Investing Opportunities

The bad news for investors has been pretty relentless thus far in 2008. The bursting of the housing bubble and the resulting credit crunch led to steep declines in the overall market in January. Then there were additional worries about such issues as emerging markets, stagflation, and the bond insurers. And recently we've witnessed the panic associated with the Bear Stearns debacle.

It hasn't been all bad for investors, fortunately. Extreme volatility presents excellent buying opportunities for long-term investors. The decline in equity markets has also led to the opening up of some of the finest value-oriented mutual funds in the world.

It appears that downturns do have silver linings after all.

I'll take all five, please
A recent Wall Street Journal article entitled "Is a 'Great Opportunity' Knocking?" discussed five value-stock funds that have recently reopened to investors. All five had formerly been so successful that they had closed their doors to new money.

But increased volatility and investor skepticism in recent months has led to outflows, and the funds have now reopened to new money in order to take advantage of the great buying opportunities that exist today.

The five funds are listed in the following table:

Fund

Top holdings

Dodge & Cox Stock (DODGX)

Hewlett-Packard (NYSE:HPQ), Comcast (NASDAQ:CMCSA), Wal-Mart (NYSE:WMT)

Longleaf Partners (LLPFX)

Dell (NASDAQ:DELL), Liberty Capital, eBay (NASDAQ:EBAY), Yum! Brands (NYSE:YUM)

First Eagle Global (SGENX)

Berkshire Hathaway (NYSE:BRK-A), Pargesa Holding, Sodexo

Third Avenue International Value (TAVIX)

Nippon Sheet Glass, Hutchison Whampoa, Yuanta Financial Holding

Tweedy, Browne Global Value (TBGVX)

Nestle, KONE, Heineken Holding

Data from Morningstar as of Dec. 31, 2007.

This lineup represents the murderers' row of value investing. Indeed, two of the all-time great value managers -- Jean-Marie Eveillard and Mason Hawkins, with First Eagle and Longleaf, respectively -- are part of this group. All five of these funds have outperformed their relevant benchmarks over the past five years, according to Morningstar.

So the most vexing question an investor faces is: Which of these funds is this year's best investing opportunity?

Separating the wheat from the, um, wheat
In order to choose the right fund for you, you first need to decide what you are looking for. Do you want additional domestic large caps in your portfolio? Then Dodge & Cox Stock and Longleaf Partners are the ones to consider. If you want to gain international exposure, then you should look at First Eagle Global, Third Avenue International, or Tweedy, Browne Global.

From there, narrow it down further by grading these funds against the criteria we hold near and dear at our Motley Fool Champion Funds investing service: low fees, low turnover, and long-tenured management. The latter is particularly important. For example, Champion Funds advisor Amanda Kish has shown that manager tenure is one of the keys for identifying outperforming funds.

For this group, both domestic funds appear to have stable management teams, as well as reasonably low fees. Among the international ones, The Wall Street Journal recommends that investors carefully consider the team that Jean-Marie Eveillard is building at First Eagle, since he's expected to leave the fund in March 2009.

Go further
For investors that would like additional assistance in analyzing these funds and the entire mutual fund universe, Amanda Kish and her community of investors offer helpful advice on how to properly analyze funds, and you'll also be able to measure these five funds against the fifty or so active Champion Funds recommendations.

In fact, one of the five funds mentioned in this article is an active Champion Funds pick. To learn which one, and start your own due diligence, click here.

John Reeves does not own shares in any of the companies mentioned in this article. He recently had the pleasure of seeing Jean-Marie Eveillard at a conference in New York City. The Motley Fool owns shares of Berkshire Hathaway. Wal-Mart, Dell, and Berkshire are Motley Fool Inside Value recommendations. Dell, eBay, and Berkshire are Stock Advisor picks. The Fool's disclosure policy is a murderer's row of transparency.


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