Morningstar Magazine - February/March 2014 - (Page 66)

Undiscovered Manager Banking on Performance By Rob Wherry Regional banks aren't typically known for their mutual funds. Don't tell that to this trio of managers. When it comes to finding good stocks, John Portwood and David Lundgren, comanagers of Hancock Horizon Burkenroad Small Cap HHBUX, don't like to stray far from their offices in Gulfport, Miss. While some of their peers travel the country to meet face to face with portfolio candidates, the pair confines its search to its proverbial backyard: stocks headquartered in Georgia and the Gulf states of Florida, Alabama, Louisiana, Texas, and Mississippi. Staying close to home isn't a novel concept in the investing world. For decades, Mairs & 66 Morningstar February/March 2014 Power have posted solid returns investing in firms headquartered in Minnesota, its home state. Bill Frels and Mark Henneman, who help run several of the firm's funds, were named Morningstar's Domestic-Stock Fund Manager of the Year in 2012. There are also studies that look at local biases, including one that showed investors tended to do better owning stocks located nearby versus those from out of town. While the Hancock Horizon fund can't claim as long a record as Mairs & Power, it nonetheless has posted enviable returns using this regional approach. The fund's 12.4% annualized gain the past decade through Jan. 15 lands it in the top 2% of the small-blend category and beats the Russell 2000 Index by almost four percentage points during that time period. In addition, the fund has held up well in down markets, limiting losses to less than the peer group average in difficult years such as 2008. "They have killed the category," says Lee Smith, vice president of Cozad Asset Management in Champaign, Ill., who has invested in the fund. While robust 2013 asset flows doubled

Table of Contents for the Digital Edition of Morningstar Magazine - February/March 2014

Morningstar Magazine - February/March 2014
Letter From the Editor
Preparing for the Next 50 Years
Morningstar Managers of the Year
Fixing the Trust Deficit
Rethinking the Path to Retirement
Same Old, Same Old
Global Briefs
The Economic Implications of an Older World
Banking on Performance
Is the Affordable Care Act Healing Health Care’s Woes?70
Baxter Has a Positive Prognosis
Leading Fidelity’s Charge for RIAs
Our Favorite Mutual Funds
50 Most-Popular Equity ETFs
Undervalued Stocks With Wide Moats
Moving the Goal Post

Morningstar Magazine - February/March 2014