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Clipper

11.9%

FPA Capital

15.29

First Eagle Global.

17.02

Legg Mason Value

4.43

Longleaf Ptners

10.94

Mutual Beacon

10.28

Oak Value

2.63

Oakmark Select

15.43

Source Capital

15.22

Tweedy Br. Amer.

4.87

___________________________ Average annual returns for the five years:

Group Average

10.80%

S&P 500 Index

-0.57%

Value funds are likely to outperform the index when the market is falling, or even treading water; the “tracking error” arises primarily in the years that stocks soar. The Clipper Fund, for example, suffered a loss of 2.0% in 1999, while the S&P 500 was rising 21%. Not surprisingly, Clipper suffered big redemptions. FPA Capital’s redemption experience was similar. Clipper’s senior manager, James Gipson, explained in his year-end 1999 letter to shareholders, “we concentrated on avoiding the (currently large) potential for permanent loss of your capital.” In a prescient moment, he quoted John Kenneth Galbraith’s observation on the 1929 market peak, “the end was at hand but was not in sight.”

What’s the model? Safety lies in careful choices

In 1991, I wrote a book, Sense and Nonsense in Corporate Finance, in which I set out several criteria for selecting fund managers. The secrets haven’t changed. Funds should (a) hold no more than 20 stocks; (b) hold their stocks on average for at least two years; c) eat their own

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