(PUB) Morningstar FundInvestor

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That time is a worry, but I welcome their embrace of controversial stocks. It’s awfully tough to beat the S & P 500 by purchasing popular names that are easy to understand. It can be done, but even successful growth managers have to go against the grain by purchasing on dips. Montag & Caldwell is something of a mirror image. After holding up beautifully with a 2008 loss that was smaller than 95% of its peers, the fund’s high-quality portfolio has skidded around more recently. It lagged significantly in 2009 and 2010 , then held up well in a tough 2011 before watching its peers zip by in 2012 and so far in 2013 . Ron Canakaris and team argue it is simply that high-quality has fallen out of favor. Others, such as the people at GMO , have made a similar case. The fund’s 10 -year returns are now right in line with the category average, yet it has gotten there with lower risk as the blow-by-blow on calendar years illustrates. That’s still pretty respectable. Going back to the fund’s 1994 inception, returns are ahead of the category but only in line with the S & P 500 . Yet, given the investor comfort level with more-stable returns, I see plenty of appeal. At Royce, most funds are doing fine, but George’s Royce Low Priced Stock RYLPX has a line of red returns in FundInvestor, indicating it has the lowest returns of any small-growth fund in the Morningstar 500 for the trailing one-, three-, and five-year periods. The culprit has mostly been materials stocks. When most stocks are up 25% or more, having a handful of double-digit losers can be brutal. George has pared that stake a bit. Only owning a smattering of health- care names has also held it back. No doubt the market will rotate to George’s sectors at some point and shareholders will be rewarded. Still, this tells me most investors should keep their weighting in this fund to a small portion of their portfolio.

Succession Longleaf has built a strong group of analysts behind Cates and Hawkins. Hawkins is 65 , and it wouldn’t surprise me if he sticks around for a long time. Cates is 16 years younger than Hawkins and serves as the bridge to a younger group of analysts. In the long run, his departure is the one that should worry fund- holders most. At Montag, the 69 -year-old Canakaris is the only named manager, but the approach is a team-driven one, where Andrew Jung and Scott Thompson play key roles. Each is named co-director of research, and they are joined by a number of seasoned pros with ownership of the firm. Chuck Royce is 73 years old, and he’s taken steps to formalize the firm’s leadership team even though he, too, professes no interest in retirement. The lead- ership team includes Royce, George, John Diederich, Chris Clark, Francis Gannon, and George Wyper. In addition, David Nadal has spearheaded their overseas research effort. It’s a great group that should provide stability. As an owner of Royce Special Equity RYSEX , however, I’m not sure I’d stick around when Charlie Dreifus retires. He’s in his 60 s. Conclusion Consistent with these firms’ long-term outlooks, they’ve built good teams around them to keep their missions going for a long time. My visits encour- aged me, while also reinforcing the importance of the long-term commitment required from fundholders if they want to reach their goals using these funds. œ