Blindly following someone else's investing lead can lead to devastating results. But over the years, some fund managers prove themselves as superior long-term investors. If you take the time to discover and understand their investing methods, and the stocks they choose for their fund shareholders, you'll learn a lot of valuable things -- and in the process, you'll become a better investor yourself.
Morningstar's best of the best
Last week, Morningstar continued its annual tradition of naming the past year's top mutual fund managers. Each year, Morningstar breaks the fund universe down into three broad categories: U.S. stocks, international stocks, and fixed-income. The fund research company then looks for funds that have performed well not just during the previous year, but also over the long run.
This year's winners include David Poppe and Bob Goldfarb of Sequoia Fund, Brent Lynn of Janus Overseas Fund, and Michael Hasenstab of Templeton Global Bond Fund. Let's take a closer look at what each of these fund managers has been doing right, and what we can learn from their moves.
Among the thousands of mutual funds in existence, it's hard to find one with a more impressive pedigree than Sequoia Fund. Founded by original managers Bill Ruane and Richard Cunniff back in 1970, Sequoia received a direct recommendation from Warren Buffett as a possible place for exiting partners of his original investment partnership to redeploy their capital.
Current co-manager Bob Goldfarb has been on Sequoia's research team since 1971, and since taking his position in 1998, he's helped lead Sequoia to strong gains during his tenure. Over the past 15 years, Sequoia has gained about 9.7% annually, with a rise of almost 20% in 2010 that handily beat the S&P 500.
The Sequoia team believes in making concentrated long-term bets. One of its longest-held stocks is Berkshire Hathaway
Brent Lynn isn't afraid to do what many international money managers won't: tread into emerging markets. While plenty of core foreign stock funds languished through Europe's woes, Lynn hasn't hesitated to look to China, India, and Brazil for great investment ideas. Many of those stocks aren't easily accessible to U.S. investors, making the fund even more valuable for its shareholders.
What's most surprising about the fund, though, is that it understands the role that U.S. companies play in international markets. Yahoo!
That understanding of the global market has helped Janus Overseas put up numbers in the top 4% of foreign growth funds in the past 10 years. It hasn't been immune to drops, losing over half its value in 2008's market meltdown, but it's made up those declines during good years.
Templeton Global Bond
Many see bond funds as boring, and their performance often matches up with that expectation. That's part of what makes Michael Hasenstab stand out from the crowd, as his fund's return nearly doubled the category average.
Hasenstab prefers to stick with debt from countries in good fiscal shape. That's why you'll find bonds from places like Australia, Sweden, and Norway near the top of its portfolio, as all of those countries have benefited from global growth trends and avoided many of the mistakes other countries have made. In addition, you'll find higher-yielding debt from emerging markets like Brazil, Russia, Mexico, and more recently, even frontier-market Egypt. That willingness to go beyond global bond indexes has fueled the fund's outperformance.
Go beyond the crowd
Award-winning fund managers have much to teach investors. Whether you choose to invest in their funds or simply watch their moves, you can use what top fund gurus have to say to get better results from your investments.
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Fool contributor Dan Caplinger wonders whether a band plays off fund guru winners if their acceptance speeches are too long. He owns shares of Sequoia Fund and Berkshire Hathaway. Berkshire Hathaway and Ford Motor are Motley Fool Stock Advisor choices. The Fool owns shares of Berkshire Hathaway, which is also a Motley Fool Inside Value pick. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy would like to thank the Academy for its support.