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Top Value Hound Hangs Out His Shingle

Plus, Vanguard Wellington celebrates its 80th anniversary and Bill Miller's big second quarter.

Morningstar Analysts, 07/06/2009

Morningstar's fund analysts cover 2,000 mutual funds. Their full analyst reports, including Stewardship Grades, are available in Morningstar Principia Mutual Funds Advanced and Morningstar Advisor Workstation Office Edition.

Veteran value manager Doug Eby is set to return to the mutual fund industry. Pending final approval from the board of trustees, the 17 Mile Value Fund will launch in September 2009 with Eby at the helm. Eby has formed 17 Mile Capital, a Carmel, Calif.-based adviser that is currently registering with the SEC.

Eby built a strong record as comanager of the Torray TORYX fund during a 15-year run. He parted ways amicably with Torray LLC in November 2007. He has since run a long-standing private partnership and served on the boards of directors of several firms, including Markel MKL, where he works with CIO Tom Gaynor, a top investor.

Eby says he will employ the same Buffett-esque style as in the past, focusing on superior businesses trading at fair prices. The fund can buy stocks of any size, but Eby says it will lean toward large caps. He says he will also purchase securities elsewhere in the capital structure if they present the best risk/reward profile.

Eby had great success at Torray participating in convertible-debt deals with Fairfax Financial FFH and Level 3 Communications LVLT, where he is now on the board of directors. Eby remains a long-term investor who favors a concentrated portfolio. He says the fund will hold 30 to 50 positions, and annual portfolio turnover should clock in at 20% or less.

The fund will offer retail and institutional share classes. Both will be a tad pricey until asset scale is achieved. The adviser's 1.00% management fee is reasonable, and waivers will cap the total expense ratios for a three-year period at 1.75% for the retail class and 1.40% for the institutional. Expenses can come down if assets rise.

Miller Posts Big Second Quarter
We usually don't like to focus on short-term results. But it's hard not to take notice when the fund at the top of a performance list is run by Bill Miller, the Legg Mason Value LMVTX manager who became famous in the fund industry for beating the S&P 500 for 15 consecutive years.

Miller's Legg Mason Opportunity LGOAX, a go-anywhere version of large-cap-focused Value Trust, posted a 48% return in the second quarter compared with just a 15% return for the S&P 500 Index. This result landed the fund on top of all other domestic equity funds with more than $100 million in assets for the second quarter.

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