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Our Runners-Up for Manager of the Year

TCW, UMB, and Dodge & Cox went above and beyond in 2005.

Russel Kinnel, 01/09/2006

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Man, it was a tough call this year. There were quite a few managers who went above and beyond to deliver great results over the long haul and in 2005. Thus, we want to recognize our runners up for the Manager of the Year awards. To see who won this year's awards, click here.

Domestic-Stock Manager of the Year Runner-Up

Dodge & Cox Team, Dodge & Cox Stock DODGX

Let's briefly review what Dodge & Cox has accomplished. In 2005, the fund returned 9.4%--that's 3.5 percentage points better than the typical large-value fund. Over the trailing 10 years, the fund has returned a breathtaking 14.6% annualized, and the trailing 15-year figure is an annualized 15.5%. In both cases, only one fund among the hundreds of large-value funds topped it. When you consider that the fund had already had billions to manage 15 years ago, those returns are absolutely remarkable.

Now, let's consider how this team could have accomplished that feat. Dodge & Cox has built a strong corporate culture that encourages analysts and managers to stay at the firm for the duration of their careers. The shop is structured as a partnership in which incoming hires buy shares at a set multiple and sell them back upon departing. Thus, the transition between generations is smooth, and the firm has been able to remain independent, avoiding the types of mergers that have sunk so many good fund firms. That means that investment professionals are leaving money on the table when they depart, but it ensures that the firm continues to do the right thing for investors.

Consider, too, that the firm has always charged modest expense ratios, closed funds before they get too big, avoided chasing Internet stocks even though that meant business went to competitors (for a while), and created only four mutual funds in its 75-year history.

Dodge & Cox generally hires its analysts out of business school, preferring not to hire folks with industry experience because the firm considers it too hard to alter their way of thinking. (There are some notable exceptions, however.) Further, each person on the investment policy committee, which is responsible for buy and sell decisions, began as an analyst. Interestingly, the equity analysts are required to do credit research, and the firm's equity operations are set up on a global sector basis, so analysts pick stocks for the domestic and international portfolios, as well as credits for the fixed-income portfolios. This helps to give them a broader perspective and no doubt helped the fund steer clear of many of the highly leveraged blowups that hit in the bear market.

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