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Choosing a Dodge & Cox Fund Is Just the Start

Patience and commitment are also required for shareholders to succeed.

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It might be tough to have confidence in an actively managed fund whose portfolio in recent years has featured  J.C. Penney (JCP),  Nokia (NOK),  Hewlett-Packard (HPQ), and  Dell (DELL). Portfolio managers are supposed to select winners, not amass a collection of troubled companies with sketchy prospects and painful stock performance. One might guess that this was the portfolio of a struggling stock-picker who should find a different career, or perhaps that of an attention-seeking hedge-fund giant, gambling that he can force shakeups in management or strategy and then profit from a quick pop in the stock price.

Neither is the case. Instead, the manager in question is Dodge & Cox, a very successful firm hardly considered one of the investment world's daredevils, and certainly not an attention seeker. Its portfolio managers aren't hoping for rapid turnarounds; they aim to produce solid returns over decades. In spite of owning challenged companies which, in some cases, have been disappointing investments, the long-term performance of Dodge & Cox's stock funds has been strong. But the ride has not been easy--the funds suffered even more than most rivals in the devastating bear market from late 2007 to early 2009 and again in 2011's rough conditions.

Gregg Wolper has a position in the following securities mentioned above: DODFX. Find out about Morningstar’s editorial policies.