Get into great funds while others are fleeing them. Don't wait for the funds to go on a hot streak. By Russel Kinnel, Contributing Editor February 6, 2008 Large-cap growth is back. After years of hibernation, the investing style characterized by large, growing companies whipped the other styles in 2007. Given the length of its slump and the still-modest valuations of large growth stocks, I wouldn't be surprised to see this category continue its streak for a while. Ironically, the shift has created some great new opportunities for value-stock investors. A slew of excellent value funds reopened because their lagging performance had spurred investors to take their money out. Yes, I prefer growth stocks' prospects, but I'm not suggesting that you abandon value stocks. Your feet should be firmly planted in both camps. After all, who really knows when the tables will turn away from growth stocks? In addition, you have to get into great funds while others are fleeing them. Don't wait for the funds to go on a hot streak and hope they haven't closed yet. These are funds you can buy and salt away. Partway there. After cracking open the door, Longleaf Partners (symbol LLPFX) may open it all the way sometime in the first quarter. If it does, pounce. Longleaf's managers, Mason Hawkins and Staley Cates, have found some supercheap stocks that they say will improve the quality of their portfolio and increase its overall discount to fair value. But they want to buy with new cash rather than sell existing holdings. So they've asked shareholders to send in more money, and they've allowed holders of other Longleaf funds to buy in. If they still don't get enough money that way, however, they'll reopen the fund to everyone. This is one of the great value funds. Longleaf's Memphis-based managers have an endearingly old-fashioned approach to investing. They run a small portfolio of stocks trading at discounts of at least 40% to their fair value. It takes a lot of legwork and patience to find good companies trading at that steep a discount, but it's worth the effort because it reduces risk and boosts long-term returns. Advertisement Oakmark International (OAKIX) and Oakmark International Small Cap (OAKEX) had a horrible 2007. International Small Cap lost 8%, and International lost half a percentage point. The funds owned tons of financial stocks and no energy stocks, in part because the energy rally made the stocks look pricey. In hindsight, we can say it was financials that were pricey, in light of the subprime-credit debacle. Not surprisingly, investors withdrew some money, and Oakmark reopened the funds on January 2. Despite the missteps, both funds boast outstanding long-term returns under David Herro, who manages International and co-manages International Small Cap. Herro hasn't suddenly gotten dumber; he simply made a mistake. In the big picture, Herro has made fewer than most. He still has good analyst support, and withdrawals mean asset bloat shouldn't be an issue for a while. His deep-value strategy was noticeably out of step last year, just as it was in growth years such as 1998 and 1999. So, if you buy after a down year, you'll likely be rewarded. WHG LargeCap Value Institutional (WHGLX) has a tongue twister of a name, and it isn't reopening. It's just a fairly new fund that few people know about yet that's run out of Dallas by Susan Byrne, an experienced value investor. At Morningstar, our analysts have long been fans of Byrne's management skills, but we were frustrated that her funds offered under the Gabelli umbrella had really high costs. But Byrne and company have bought their freedom from Gabelli and launched some low-cost funds that allow you to tap her skills at a reasonable, 1% expense ratio. Advertisement Despite the "institutional" name, you only have to invest $5,000 to get in. Unlike Herro, Byrne is not focused on deep value. She wants cheap companies, but she also wants positive earnings surprises that signal a company has turned the corner. Columnist Russel Kinnel is director of mutual fund research for Morningstar and editor of its monthly FundInvestor newsletter.