Among the many fund managers I've recently studied, I've seen a clear split between caution and optimism, separating the PIMCOs from the Ken Fishers of the world. Robert Rodriguez falls squarely in the cautious crowd, and his vote carries a lot of weight.

Although not as well known as Bill Gross or Warren Buffett, Rodriguez certainly belongs among the top echelon of the money management world. Since joining First Pacific Advisors in 1983, he's cultivated a 25-year track record that is unparalleled among diversified equity funds --  largely because he knows how to smell danger. He correctly predicted the Internet and housing bubbles.

Among portfolio managers, he's somewhat of an antihero, tossing orthodoxy aside to speak openly about the "small-mindedness" of diversification. As of Sept. 30, 2009, his FPA Capital Fund (FPPTX) held just 22 stocks that made up 75% of assets, along with a single short-term Freddie Mac (NYSE:FRE) bond (2%), and a whole bunch of cash (23%).

FPA Capital Fund


$1.0 billion

Expense Ratio


1-Year Return


5-Year Average Annual Return


10-Year Average Annual Return


Source: Morningstar.

Top 5 Holdings


% of Assets





Rosetta Resources


Arrow Electronics


Rowan Companies (NYSE:RDC)


Source: Morningstar.

Investors who don't like Rodriguez's unconventional management style are clearly free to leave the FPA Capital Fund any time they wish. But if the last quarter-century is any indicator of the fund's future success, it's likely that they'll regret that decision later. The fund has been closed to new investors since mid-2004.

You don't know what you got ('til it's gone)
Rodriguez is taking a one-year sabbatical beginning in January 2010, but he's leaving his holdings in the fund as a sign of good faith in his handpicked successors. His temporary departure coincides with a period of history marked by what he considers to be outrageous fiscal irresponsibility.

With federal government deficit forecasts of an additional $7 trillion to $9 trillion between now and 2019, Rodriguez doesn't blame either political party for the dire situation at hand. Instead, as he wrote in his most recent letter to shareholders, he points to the hoi polloi: "It is we, the citizens, who keep reelecting these power-centered financially inept politicians and it will be our children and grandchildren who will have to 'pay the piper.' It is not right and is morally reprehensible that one generation would do this to another."

The kinds of change Rodriguez wants to see, which include the widespread reform of government spending habits, are in no sense the kind of transformations we can expect to see overnight. So you can imagine that the stocks he's keeping in his portfolio will be long-term plays. Among them are oil and gas exploration and drilling company Atwood Oceanics (NYSE:ATW), which sports a forward P/E ratio of just more than 7, a 20% consensus five-year earnings growth estimate, and a 25.8% trailing return on equity.

He's also got sizeable positions in data-storage device maker Western Digital (NYSE:WDC), metal processor Reliance Steel and Aluminum (NYSE:RS), and independent oil and gas company St. Mary Land & Exploration (NYSE:SM). Conspicuously absent from his holdings are positions in health-care, utility, and consumer-goods stocks.

No country for old politicians
That probably has as much to do with his lack of faith in our elected representatives as it does his belief that reining in spending starts at home. Rodriguez says, "Most families know that before they can regain control of their finances, they first have to control their spending. If our elected officials cannot agree to meet this principle of fiscal discipline and be held accountable to it immediately, they should be ousted from office."

Rodriguez has plenty of experience, and he knows how government policy affects the investment environment. As he sees it, if the U.S. continues issuing dollar-denominated debt while printing more money, which devalues that debt through inflation, demand for Treasury notes and bonds will plummet. "Our lenders will not stand for this," he wrote, "and current trends show that foreign central banks are beginning to shift their holdings from Treasury notes and bonds to much shorter term Treasury bills. This is an ominous trend."

One of his parting comments for investors strikes the nail on the head: "I urge all of you to convey to your elected representatives that this spending madness must stop. If it does not, we will eventually face a crisis that will be far worse than the one we are in now."

These are powerful words from a man who has proven himself to be among the world's best investment managers. Shareholders will likely miss Rodriguez during his sabbatical, but I expect they'll wait patiently for his return, and look forward to more of his colorful, thought-provoking commentaries.

Who's your pick for the best portfolio manager of 2009? Share your opinions in the comments section below.

Atwood Oceanics is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Chris Jones wishes he could spend a year's sabbatical like Rodriguez will: reading Mark Twain's Roughing It and racing Porsches. He owns no shares of any company mentioned in this article. The Motley Fool's disclosure policy made more money than Michael Schumacher and Dale Earnhardt, Jr. combined last year.