I've been invested in the Muhlenkamp (FUND:MUHLX) mutual fund for a few years now. But just like most stocks and funds, it got whacked in 2008 -- to the tune of 40%. Even though I know better, when staring at my loss of thousands of dollars, I've wondered whether I should sell my shares and move the remaining money into another fund.

In principle, that's good thinking -- you should always have your money invested in your best ideas, in the places where you have the most confidence. So I needed to figure out if this was still a very promising fund to me.

First, I looked at its expense ratio, a not-unreasonable 1.15%. (I should keep an eye on that percentage, though; since funds have shrunk so much recently, some will be hiking their fees to make up for reduced income.) It has no load, which is good. Oops! The fund only has two stars from Morningstar! But actually, that doesn't matter too much to me. The stars mainly reflect past performance, which I already know hasn't been stellar recently.

The fund recently held 22% of its assets in cash, which might be worrisome, except that there are just so many bargains out there right now. I'm glad the fund has cash to deploy. How about its top holdings? Well, as of the end of the year, they were Philip Morris International (NYSE:PM), UnitedHealth Group (NYSE:UNH), and Berkshire Hathaway (NYSE:BRK-B). Perhaps more importantly, it only holds around 30 to 40 stocks, concentrating its assets in its managers' best ideas. Better still, its turnover ratio is just 22%, meaning that its managers are patient, not trying frantically to register quick gains.

Candid communications
But one of my favorite things about this fund is how frequently I hear from its managers. Another bit of reassurance came in the mail recently. Its quarterly memorandum stated right at the top of the front page: "On December 31, 2008, the Net Asset Value of the Muhlenkamp Fund was $38.60, down $26.40 year-to-date." Wow -- they're not trying to bury the bad news, are they?

The letter from manager Ron Muhlenkamp started out, "In 2008, we had a lousy year." He could have just blamed the economy, but instead he took some responsibility, saying that "it's clear that we failed to appreciate the degree to which a number of problems [in the economy] would come together to create a mutually reinforcing downward spiral in nearly all asset prices."

I like that. And that's a key reason why I'm hanging in there, holding on to my shares. I know that I have to be patient with the individual stocks in my portfolio, and so I should be patient with my funds, too. Patience is always important in investing, and it's even more critical after a big market downturn.

Meanwhile, I'll keep reading and learning from the Muhlenkamp mailings. For example, last year Mr. Muhlenkamp pointed out how we complain about the rising cost of gas, yet we don't complain about the cost of bottled water. He mentioned that Coca-Cola (NYSE:KO) has heftier profit margins than ExxonMobil, yet people are generally much angrier about the oil company's profits. His explanation: "The things we want are the things we'll pay up for -- and that's where the margins are!"

That sure seems true to me, and it makes me want to run a screen for companies with high profit margins (and sizable dividends, too, as icing). Here -- let me do it -- and share a few results:


Net Profit Margin

Recent Dividend Yield

China Mobile (NYSE:CHL)



GlaxoSmithKline (NYSE:GSK)



Diageo (NYSE:DEO)



Data: Yahoo! Finance.

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Longtime Fool contributor Selena Maranjian owns shares of Berkshire Hathaway and Coca-Cola. Muhlenkamp is a Motley Fool Champion Funds selection. Diageo and GlaxoSmithKline are Motley Fool Income Investor picks. UnitedHealth Group, Coca-Cola, and Berkshire Hathaway are Motley Fool Inside Value picks. UnitedHealth Group, Morningstar, and Berkshire Hathaway are Motley Fool Stock Advisor selections. The Fool owns shares of Morningstar, UnitedHealth Group, and Berkshire Hathaway. Try our investing newsletters free for 30 days. The Motley Fool is Fools writing for Fools.