What Mulholland didn’t worry about were the stocks in his portfolio.
“The companies we owned were so cheap that, barring a total collapse of the economic system, I knew at some point we were going to make a lot of money,” he says.
That time has come. Mulholland, 53, bought Apple in 2008 for $80 to $128 a share. He also hung on to his investment in companies such as Sidney, Neb.-based Cabela’s, a retailer of hunting and fishing products, and Polaris Industries, which makes all-terrain vehicles.
The rebound in those stocks helped propel the now-$452 million fund to gains that beat the Standard & Poor’s 500-stock index by a wide margin. The fund returned 13.1 percent annualized during the five years ended on Feb. 15 compared with 4.7 percent for the S&P 500. Matthew 25 gained 26.8 percent over three years and 25.4 percent in one year.
Those results make Mulholland’s fund No. 1 in the U.S. diversified-stock category in Bloomberg Markets magazine’s annual ranking of mutual funds.
“Mark is the best investor around that no one has ever heard of,” says Steven Roge, a financial adviser who owns shares of the fund.
The ranking of stock and bond funds includes U.S.-domiciled funds with more than $250 million under management as of Feb. 15. Funds are ranked by total returns for one, three and five years and by their Sharpe ratios for three and five years. The Sharpe ratio measures the performance of a fund adjusted for risk. Each of the five measures is given equal weight.
Like Mulholland, the managers of other winning funds in the ranking capitalized on the steep decline in 2008 and 2009 by loading up on a range of investments, from home-building and bank stocks to risky mortgages.
For Chuck Myers, manager of the $5.3 billion Fidelity Small Cap Discovery Fund, the biggest bargains were home builders, which in 2008 were selling for less than the value of the land on their balance sheets, he says. Buying them helped Myers’s fund secure the top spot in the small-cap equity category, with a 25.8 percent return for one year and an average return of 15.6 percent over five years. The fund was also No. 2 in diversified U.S. equities.
“I wanted to position myself in stocks that were the cheapest possible compared to normal earnings,” says Myers, 37. The rally in stocks, with the Dow Jones industrial average exceeding its 2007 all-time high in early March, has reduced the number of such companies, he says.
Investors rewarded Small Cap Discovery with $1.3 billion in new assets in 2012. In January, Fidelity closed the fund to new investors.
International stocks followed their U.S. counterparts skyward beginning in 2009, helping Bill Nygren’s $785 million Oakmark Global Select Fund tie for No. 1 in the global equities list.