While there is a far amount of skepticism out there surrounding actively managed mutual funds, there are a small number of managers with the skill to actually outperform the market over the long run. The trick is to identify these managers before everyone else does.

Of course, once you find such a person, you should ask yourself if you would be willing to let him or her take a very concentrated approach to investing your money. After all, wouldn't you rather have two dozen of your manager's best ideas than 100 mediocre ideas? Taking a concentrated investing approach certainly has its risks, but when carried out by talented professionals, the results can be very pleasing. Let's look at three successful actively managed mutual funds that tend to focus on just a few dozen holdings in their entire portfolio.

Appleseed (APPLX)
This socially responsible value fund has only been around since the end of 2006, but in its short life it has managed to rack up a category-topping, if very volatile, track record. According to Morningstar data, at last count the fund held just 24 securities, so you're really relying on management's stock-picking skills here. The team of five portfolio managers looks for undervalued stocks with strong fundamentals, while keeping a strong focus on potential downside risk to the portfolio. But in addition to these criteria, the team also requires a company to behave in a responsible manner with respect to their impact on the environment and on society in general. So this fund clearly won't look or act like many of its peers.

As might be expected, this high-conviction portfolio tends to cluster its bets in certain sectors. Health-care names currently make up just more than a third of the fund's equity holdings. Big plays here include Pfizer (NYSE: PFE), which is selling at a reasonable price-to-earnings ratio of 19 and soaks up nearly 11% of total fund assets. However, the team is somewhat defensive with respect to the overall economy, stuffing roughly 18% of assets into cash. Management is also very concerned about potential inflation and has invested heavily in gold bullion as a hedge. In fact, the SPDR Gold Shares ETF (NYSE: GLD) is the fund's second largest holding at almost 6% of assets.

Over the past three years, Appleseed ranks in the top 2% of all mid-cap value funds. That's impressive, but due to its defensive stance the fund has also ranked near the very bottom of that same grouping in the past year. So expect some volatility here, but if you're looking for a socially responsible fund that's willing to take a stand on the direction of the economy, Appleseed is a good choice.

FMI Large Cap (FMIHX)
The management team in charge of FMI Large Cap also employs a highly concentrated investing approach, with just 26 stocks in the portfolio at last glance. Management looks for firms with a strong franchise, high cash flows, and significant market share whose stocks are trading below estimates of fair value. The team believes many solid yet unexciting companies have lagged in the current market rally and has made a point of owning many of these firms, including UPS (NYSE: UPS) and Monsanto (NYSE: MON), in expectation of further gains as the market cycle matures. Patience is a hallmark in this portfolio, as evidenced by the fund's low 20% annual turnover.

FMI Large Cap is a solid, large-cap anchor fund for any portfolio. While you wouldn't want this fund to be your sole source of large-cap exposure, it could serve as a good complement to a broader, more inclusive index fund or exchange-traded fund. With such a concentrated portfolio, it's possible that management's stock picking could work against the fund at some point, but so far, their track record has been impeccable. Since its inception in January 2002, the fund has posted an annualized 7.2% gain, versus a 3.3% showing for the S&P 500 index and a 2.8% return for the average large-cap blend fund. This concentrated fund is a long-term winner.

Sequoia (SEQUX)
This oldie but goodie dates back to 1970, although the current lead manager has been at the helm for just short of 13 years. Sequoia reopened to new investors in May 2008 after being closed for 25 years, so it's no surprise that many folks have been giving this fund a second look. Management here follows a Buffett-like investing approach, seeking out top-quality companies with sustainable competitive advantages and excellent management teams. Perhaps not surprisingly then, Buffett's own Berkshire Hathaway (NYSE: BRK-B) is currently the fund's top holding, accounting for 11.8% of assets. The fund has a habit of taking big bets and relying heavily on management's best ideas. As of the latest available data, the fund sports 31 holdings, with the top 10 holdings accounting for 56% of total fund assets.

Fortunately for investors, that high-conviction approach has translated into some pretty hefty returns for investors. Over the past decade and a half, the fund has cranked out an annualized 9.4% return, better than 96% of all large blend funds.

But don't expect the portfolio to consistent entirely of your run-of-the-mill value stocks. The team recently purchased Google (Nasdaq: GOOG), citing its dominant market position and strong cash flow as attractive attributes. Management sees Google as more of a marketing play than a tech company and believes the company can retain dominance in its field, as evidenced by the failed attempts of competitors to steal away market share. Sequoia won't lead the market in more speculative or momentum-led environments, but over the long run, it should deliver quite nicely. This fund is a prime example of how talented managers can make the most of a concentrated investing approach for the benefit of fund holders.

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