10 of the Best Mutual Fund Managers Around

At Morningstar, we focus most of our efforts on figuring out which funds have the best prospects for the next 10 years or longer. After all, what everyone wants is funds that will outperform and get them to their goals. Today, I aim to go in a different direction in order to recognize some of the very best domestic-stock fund managers who have served investors well over the years. We're not recommending all of their funds, because they may be too bloated, their expenses too high, or there could be some other reason. In short, below are 10 of the best managers. I wrote 10 of the best rather than the 10 best because there are other great managers I just couldn't fit in, and, after all, this is just my opinion--each of my colleagues would come up with a slightly different list.

I looked for managers who produced an outstanding return and employed a creative, original strategy in a way that would benefit a lot of investors by avoiding extreme volatility and producing strong returns even after assets swelled.

Beyond those subjective rules I also required that the manager must still be running a fund, must have at least 10 years' tenure at that fund, must run a domestic-stock fund from one of our nine Morningstar Style Box categories, and must be a solo manager or part of a small team, so that I can safely assume he was a big part of the fund's success. The team rule means good managers from big team efforts like Dodge & Cox, some Vanguard funds, and American didn't qualify. To make the final cut, I favored managers with longer track records.

Finally, note that I'm not trying to rank my 10 managers. It's tough enough to cut the list to 10 without pretending that I can really separate number five from number six. So, lest anyone infer a ranking from the order below, I put them in alphabetical order by ticker.

Will Danoff
There's no doubting that Will Danoff was schooled in the ways of Fidelity legend Peter Lynch. AtFidelity Contrafund FCNTX, Danoff has proved to be a remarkably adept investor. He takes a flexible approach to growth investing. He's constantly shifting to areas where prospects are brighter than most investors believe. That's a little different from a momentum manager who chases what's already gone up. Danoff aims to get in before a sector has gone up. Over the past 15 years, Danoff has produced returns of 572% compared with 363% for the S&P 500.

Joel Tillinghast
Joel Tillinghast is also a flexible investor, but he has a small-cap value bent at Fidelity Low-Priced Stock FLPSX. Like Danoff, part of Tillinghast's achievement is that he managed to keep producing great returns even though the fund became quite big. The fund is way too big now, but it is absolutely remarkable what Tillinghast has done over time. He's had to own hundreds of names--the fund is up to 700 today--yet he's still beaten most any index and peer group you can find. One thing Fidelity has been good at is bringing along investing junkies like Tillinghast who thrive when they are allowed to just pick stocks rather than doing roadshows or other marketing efforts, which at some companies are considered just as important as managing portfolios.

Bob Rodriguez
Over the past 15 years, no small-value manager has bested Bob Rodriguez's 17% annualized return at FPA Capital FPPTX. Yet Rodriquez has done that while putting safety first and returns second. He's a picky investor. He wants companies with strong cash flow, dominant market position, and healthy balance sheets, and their stocks have to be trading cheaply. If he can't find enough stocks that make the grade, he'll close the fund and raise cash in order to protect investors' principal. The fund's long-term record shows he hasn't had to sacrifice returns to do that.

Saul Pannell
His name isn't as famous as some, but you better believe investors have found him. Pannell's outstanding eclectic style has produced huge returns and made Hartford Capital Appreciation ITHAX a $24 billion giant. You can't really rule out any sector or market cap for Pannell, although asset bloat has meant small caps are much less important to this fund than they once were. Pannell, of Wellington Asset Management, blends macroeconomic work with bottom-up selection to find the next winners. Like Danoff, he's all over the map. His most recent portfolio boasts a hefty foreign stake and big bets on tech and cyclicals. What matters is that with the help of Wellington's analysts, he's found winners of all stripes. The mutual fund has returned 469% to the Wilshire 5000's 148% since its 1996 inception.