Despite the gloomy jobs and housing picture painted by the current economy, the stock market has paid little attention, continuing on its upward trajectory. In fact, the Dow Jones Industrial Average is now up nearly 90% from the lows reached in March 2009. But the market rebound hasn't lifted all boats equally. Some sectors of the market, and some money managers, have continued to struggle.

But just because an investment is down and out doesn't mean it isn't a good long-term value. Let's take a look at two actively managed mutual funds that have encountered significant difficulties in recent years and examine why they might have better days ahead of them.

Brandywine (BRWIX)
One look at Brandywine's trailing performance record might prompt one to ask why they should ever buy this fund. After all, the fund now ranks in the bottom 25% of its peer group over the most recent 15-year period. The fund trailed the S&P 500 by nearly 18 percentage points in 2009 alone after trailing in 2006 and 2008 by smaller amounts. Brandywine has always been a choppy performer, reaching the top of the charts one year, and sinking to the bottom the next, but recently those top years have been harder to come by. The fund moves quickly into and out of stocks (as indicated by its 225% annual turnover) in an attempt to capitalize on firms management believes will exceed near-term earnings expectations, so execution is key here.

The fund has been hurt by poor recent performance from holdings such as Aegean Marine Petroleum Network (NYSE: ANW), which reported disappointing third quarter earnings as a result of oversupply issues and weaker tanker rates. Likewise, the fund also lost ground on China-based solar panel producer Trina Solar (NYSE: TSL) which beat Q3 earnings expectations by 34% but remained under pressure due to concerns of overcapacity in the solar power supply chain. Both stocks were sold toward the end of last year.

Despite its recent troubles, I'm not willing to write off this fund just yet. Brandywine has a solid management team and investment process behind it that goes back decades. It's true that the fund's earnings momentum strategy can lead to uneven year-to-year results, but the fund's investment process won't always be out of favor in the market.

Brandywine tends to focus on higher-quality names which have not exactly been market leaders in recent years, especially in 2009's high-beta-rewarding environment, which is the biggest dent in the fund's track record. But the fund has some good names on tap right now, including Apple (Nasdaq: AAPL), which is increasing its user base at a rapid rate thanks to its dominance in the tablet computer market, as well as Prudential Financial (NYSE: PRU), which recently completed its purchase of two Japanese life insurance companies from American International Group and is expected to post strong earnings when it reports later this week.

In fact, Brandywine has been showing a little bit more life as of late, beating out 55% of its peers so far this year. The fund also bested the S&P 500 by more than 6 percentage points in 2010. This fund is definitely not for risk-averse folks or those who like a smooth ride, but folks who are willing to wait out the inevitable downs should be rewarded with some pretty decent ups over the long-run. I think as market leadership shifts out of the more speculative, initial-recovery stage into a higher-quality, later stage of growth, Brandywine should find itself on top once again.

Bridgeway Large Cap Growth (BRLGX)
Bridgeway has been a casualty of its own investment approach in recent years. Quantitative investing shops like Bridgeway have been absolutely slammed during the market meltdown, so the firm's troubles are not an isolated event. In the wake of rapidly shifting market sentiment, many quant shops found that the models they relied on in the past seemed to be inadequate in periods of intense change and uncertainty like that which we just lived through. Bridgeway was no exception, as many of its funds plunged to the bottom of their peer group ranking. The Large Cap Growth Fund now ranks behind 80% of all large-growth fund over the past five years.

Lead manager John Montgomery admits that the shop's models faced difficulty because they looked for reasonably valued companies that were doing well on a fundamental basis and beat earnings expectations -- exactly the kind of companies that have underperformed in recent years. But as with Brandywine, I think the tide will turn for Bridgeway as the market rally matures. Although this particular fund has only been around for about seven-and-a-half years, the quantitative backing and model methodology for the fund has been practiced and perfected at Bridgeway since 1993 when the firm was founded. And the long-term track record for that strategy is top-notch.

Right now, Bridgeway has found a lot to like in the technology sector, which I think has a lot of growth potential ahead of it. It counts low-valuation tech stocks Intel (Nasdaq: INTC), Hewlett-Packard (NYSE: HPQ), and IBM (NYSE: IBM) among its top holdings. These firms should do well as tech spending revives in 2011 and 2012, and given their current P/Es of 11, 13, and 14 respectively, their stocks are priced attractively.

The shop has recently revised and reoptimized their quantitative models for each of their funds, so investors may see some changes in the coming quarters. At any rate, based on the shop's long-term track record, I do think Bridgeway will turn the corner, and I think Bridgeway Large Cap Growth is best positioned to take advantage of the next areas of market leadership. Results here have definitely been bumpy from year to year, so be prepared for some volatility in the short-term. However, investors who are willing to sit tight through the downturns should be quite pleased with the fund's results down the road.

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Amanda Kish is the Fool's resident fund advisor for the Rule Your Retirement investment newsletter. At the time of publication, she did not own any of the funds or companies mentioned herein. Apple is a Motley Fool Stock Advisor pick. Motley Fool Options has recommended buying calls on Intel, which is a Motley Fool Inside Value selection. The Fool has written puts on Apple and has bought calls on Intel. The Fool owns shares of Apple, Intel, and IBM . Try any of our Foolish newsletter services free for 30 days.

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