Sure, 2000 was grim for investors, but there were actually a number of worthy candidates for manager of the year. Perhaps the biggest difference between our domestic-stock winner, Clipper Fund, and the runners-up was paste. Clipper has a nice long record that goes back to 1986, but you have to paste together different records to go back that far for our runners-up.
On the positive side, our runners-up have executed virtually flawlessly at their funds. By the way, I own both of these funds, so my money is where my mouth is.
Bill Nygren/Oakmark Select: In 1999, Oakmark Select was one of a small group of value funds to produce a double-digit gain. In 2000, it was one of an even smaller group to gain more than 20 percent. What's really impressive is that those two groups are almost mutually exclusive. The value stars of 1999 were mostly similar to Bill Miller's Legg Mason Value - they sprinkled tech and telecom stocks into their value portfolios. In 2000, most of the value stars were deep-value players like Clipper and Kemper-Dreman High Return. Only four value funds managed to make it into both groups of strong performers. In addition, Nygren landed in the top 26 percent of mid-value funds in 1997 and 1998. It's either a strong coincidence or the guy's a very good stock-picker.
Before Oakmark Select was launched, Nygren was the head of Harris Associates' stock research group. Thus, he deserves partial credit for Oakmark Fund's fine performance before 1997. Still, it's not quite the same as a 15-year record at one fund (which Morningstar's pick for domestic-stock manager of the year, the management team at Clipper, achieved), so he just missed out on the award.
Howard Schow, Theo Kolokotrones, and Joel Fried/Vanguard Capital Opportunity: Like Oakmark Select, this fund managed to cobble together a strong performance in 1999 and 2000 - only it did it from the growth side of the style box. Vanguard Capital Opportunity returned 98 percent in 1999 and 18 percent in 2000. Most of the funds to return 90 percent or better crashed and burned in 2000. Vanguard Capital Opportunity didn't because it took on less risk. It didn't get so caught up in the Brave New World that it ignored earnings and valuations. Thus, when the Net bubble burst, the fund continued to shine. Schow, Kolokotrones, and Fried have only been on this fund since February of 1998.
The trio has a much longer record at Vanguard Primecap, which stands up well against just about anyone. Their 10-year returns, for example, are better than Bill Miller's. However, Primecap's 2000 was good, but not great. The fund returned 4 percent.
The stockpickers also do an admirable job of treating shareholders right. The funds charge low expense ratios, and each one closed before assets could damage performance.