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These Big Funds Had Happy Shareholders in 2011

Not many stock funds notched respectable returns in 2011, but these funds managed to do so.

Stocks staged an impressive recovery in 2011's final quarter, but the year was still a disappointing one for many holders of equity mutual funds. On the domestic-equity side, most funds struggled to keep up with the venerable S&P 500 index, as the blue-chip dividend payers that dominate the index thumped most other types of stocks in a nervous market environment. International-stock funds had their own set of problems, ranging from the eurozone crisis to concerns about slowing growth in emerging markets, as Morningstar's Gregg Wolper chronicled in this article.

Yet the equity mutual fund universe wasn't without at least a few success stories in 2011: Some funds managed to beat the index and deliver robust returns. As a counterpoint to last week's article, in which I highlighted some widely held funds that were notably disappointing in 2011, I used our  Premium Fund Screener to home in on large offerings that fared just fine last year. As with last week's screener, I started by searching for those domestic- and international-equity funds with asset bases of more than $5 billion, to ensure that our screen's output wouldn't be dominated by fly-by-night funds that are heavily concentrated in a specific pocket of the market. To ensure that at least some funds would make it through our screen, I set a relatively modest performance hurdle: a return of 5% or better in 2011.

Illustrating the fact that equity-fund returns were no great shakes last year, the resulting list was svelte, with just 10 distinct portfolios clearing our performance hurdle. All of the funds were domestic-equity offerings, and seven of funds hailed from Morningstar's large-value or large-blend categories.

Premium users can click  here to view the screen and its complete output; here's a look at a handful of the funds that made it through the screen.

 Artisan Mid Cap Value Investor (ARTQX)
Although most of 2011's best-performing stock funds focus on large-cap issues, this closed fund managed to post top-flight returns with more than two thirds of its assets in mid-cap names. Morningstar analyst Greg Carlson notes that the managers' emphasis on quality--they seek cash-producing companies with strong financial positions--held the fund in good stead in the year's volatile third quarter. This isn't the first time the fund has landed on top in a tumultuous market environment, either: Thanks to its emphasis on quality, it also fared much better than its typical category peer and the S&P 500 during the financial crisis of 2007 through early 2009. Our analysts also rate the fund well on the stewardship front, giving this and sibling  Artisan Small Cap Value  plaudits for closing preemptively to preserve the managers' flexibility.

 T. Rowe Price New Horizons (PRNHX)
The only small-cap fund to make it through our screen, this offering posted positive returns and landed near the top of its small-growth peer group on the strength of top-performing holdings like Pharmasset , which nearly quintupled in value last year. Manager Henry Ellenbogen is still fairly new here, having taken over for the retiring Jack Laporte in March 2010, but results during his short tenure have been impressive. Ellenbogen also enjoyed a successful four-year stint at sibling  T. Rowe Price Media & Telecommunications (PRMTX) before taking over here. T. Rowe also earns points for its stewardship: Not only is this one of the cheapest small-growth funds around, but the firm has done a tremendous job retaining personnel over the years.

 Vanguard Equity-Income (VEIPX)
This fund epitomizes what worked well for stock funds in 2011. With dividend-producing companies in high demand among yield-starved investors, its focus on income allowed it to own some of the market's best performers, including integrated energy firms like  ExxonMobil (XOM) and  Chevron (CVX) as well as drugmakers like  Pfizer (PFE) and  Merck (MRK). And in a market environment that generally favored the very largest companies, this offering benefited from having an even larger average market cap than the S&P 500. Morningstar's Dan Culloton also endorses the fund's sober strategy and proven management teams: Wellington Management runs 60% of the portfolio, while Vanguard's own Quantitative Equity Group steers the remainder. Ultralow expenses ensure that a high share of the fund's dividend yield flows through to shareholders.

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