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Our Picks

Hidden Gems 2002: Great Funds Flying under the Radar

These small funds deserve investors' attention.

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At Morningstar, there are a few things we do at the beginning of each year. We rebalance our portfolios. We curse Chicago’s professional sports teams (in the post-Jordan era, anyway). And in our biweekly print publication,Morningstar Mutual Funds, we write about a few small, undiscovered funds with terrific prospects.

We’re not making the argument that tiny funds are always superior to larger offerings. Indeed, we found in a recent Morningstar Mutual Funds study that larger funds actually have delivered superior returns in some parts of the market, including large value. But a big asset base is undeniably a handicap in areas, such as small blend and mid-cap growth, where turnover rates are higher and the liquidity of individual stocks is lower. In the past, we’ve therefore profiled then-miniscule small-cap funds like Wasatch Small Growth (WAAEX) that have subsequently used their tiny asset bases to good effect.

Even in areas where the size of the fund and liquidity are less important, we think it’s worth highlighting a few terrific funds that haven’t yet captured investors’ attention. There are a lot of weak funds with big asset bases out there, and to the extent we can help steer folks to better alternatives, we’ll do so. This year’s selections are a varied lot, but they do have one thing in common: experienced managers with terrific track records. We’re delighted to give them some much-deserved attention.

Scott Cooley does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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