Hodges: Favorite for Small-Caps

04/10/2014 9:00 am EST

Focus: FUNDS

Tom Bishop

Founder, BI Research

Every year, I make a habit of poring over the performance data for the previous year, looking for the best mutual funds; from this, I do have a favorite buy, says Tom Bishop, editor of BI Research.

Suppose I were to tell you that I have found a small-cap focused fund—which is, after all, BI Research’s niche in the investment world—that was in the top 25% of funds for 2013, and for 2012, and 2011, and 2010, and 2009, and gained 381% in the current bull market (versus the S&P’s 178%), while doing no worse than the market in 2008.

Suppose it was also rated 5-stars overall by S&P, and 5-stars for the past three years, and 5-stars for the past five years. Would you be interested? Well, wouldn’t you know! I have found just such a fund: the Hodges Small Cap Fund (US:HDPSX).

Hodges Mutual Funds runs seven funds in all but five are very small, or even, brand new. The flagship fund, started in 1992, is simply called the Hodges Fund (multi-cap) named after Don Hodges, the founder, and has about $355 million in assets.

But it has not gone unnoticed that their small-cap fund has had a barn-burner track record and it’s holding a total $920 million (up from $286 million, just a year ago).

The fund is focused on both growth and value small-cap stocks using rigorous fundamental analysis to find opportunities that may be missed or misunderstood by more conventional approaches.

In the vein of buying what you know, nearly a third of this Dallas-based management team’s stocks are located in the Texas area where they can easily kick the tires. Scanning down the list of 80 stocks, I feel at home. I now own, have owned, or recently thought of buying many of these.

The fund is still open to new investors. I know, because I just bought some and just checked the Web site. But, at a certain point, good funds do close and you can only invest after that if you already own it in a given account. So keep that in mind.

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