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In Global Investing World, One Star Fund Manager Gets By On Cab Fare

Carla Fried

The Mairs & Power Growth mutual fund gained 22% in 2012, a nice chunk of change better than the 16% gain of the Standard & Poor’s stock index. But that’s not really why fund research firm Morningstar just anointed the $2.6 billion large-capper as its U.S. stock fund of the year. What earned Mairs & Powers Growth the accolade is the fact that since co-manager Bill Freis took the reins in late 1999 the fund’s 8.2% annualized gain is miles ahead of the 2% annualized return for the S&P 500 index. Morningstar says it’s a Manager of the Year award, but in Oscar-speak, Morningstar always leans to handing out lifetime achievement awards for a long-term body of work, not just a hot year.

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Freis and co-manager Mark Henneman, who came aboard in 2006, generate their index-besting return the old-fashioned way. Literally. Industrials account for more than 37% of the portfolio, according to Morningstar, with technology stocks claiming less than 7% of the portfolio. That’s because the managers like to keep a close eye on their investments through periodic meetings. Given their St. Paul roots, that has produced a Minnesota and Upper Midwest heavy portfolio.

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The five largest holdings in the 47-stock portfolio are all Twins Cities based: Valspar (VAL), 3M (MMM), Target (TGT), U.S. Bancorp (USB) and Medtronic (MDT), seen here in a stock chart.

VAL Chart
VAL Total Return Price Chart

Before you consider piggybacking, it’s important to know that they’ve owned all five stocks for at least a decade. And little fresh money has recently gone to the Top 5, which account for about 19% of assets. The managers only made teeny additions to their Medtronic and Target stakes in 2012. And only two new names were added to the fund in the first nine months of 2012: Schlumberger (SLB) and Cray (CRAY), but both positions are less than 1% of fund assets. Of the top 5 holdings, YCharts currently rates Target and US Bancorp as Attractive.

Carla Fried, a senior contributing editor at ycharts.com, has covered investing for more than 25 years. Her work appears in The New York Times, Bloomberg.com and Money Magazine. She can be reached at editor@ycharts.com.

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