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Investing Specialists

Nine Buy Ideas from Our Best Performing Managers of 2009

Berkowitz's Fairholme Fund wasn't the only top performer on our list last year.

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By Greggory Warren, CFA | Senior Stock Analyst

With 2009 drifting away in the rearview mirror, we thought it would be interesting to take a deeper look at the holdings, purchases and sales of some of our best performing managers last year. In a period when just about everything in the stock market recovered strongly (especially off the lows set in early March of last year), it shouldn't have been too difficult for our top managers to generate positive returns. Beating the benchmark S&P 500 Index (SPX), though, which increased more than 26% (on a total return basis) during 2009, should have been a more difficult undertaking. Of the 22 fund managers we track, more than two-thirds of them--15 funds in total--beat the S&P 500 Index last year. Even better, most of them were not coming off a year of extremely terrible performance during 2008, although several of them did trail the benchmark by a fairly wide margin that year.

Winnowing the list down to a more manageable level, we decided to look at only those funds that had beaten the index by a sizable margin--in this case, 500 basis points--during 2009. This produced a list of eight managers that included Value, Growth and Blend funds. While  Fairholme (FAIRX) may have stolen the spotlight this week, with manager Bruce Berkowitz named as Morningstar's Domestic-Stock Manager of the Year, its impressive to see it was not the only fund producing strong performance during 2009. That said, Berkowitz had a stellar year last year, generating a 39% return after a less than 30% loss during 2008. Fairholme's approximately 9% annualized return over the last five years is much stronger than the gain reported for the S&P 500 Index. This was matched only by  Amana Trust Growth (AMAGX) and  Yacktman (YACKX), which reported gains of 32% and 59%, respectively, last year, along with annualized returns of 9% and 8%, respectively, over the last five years.

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The Morningstar Ultimate Stock-Pickers Team does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.