Brent Lynn turned the Janus Overseas Fund from one of the worst performers in its class into one of the best by raising the company's stake in emerging markets such as India and South Korea.
"That's where we're finding the most attractive growth, the most dynamic businesses and the most attractive valuations," said Lynn, 41, who has run the fund on his own for Denver-based Janus Capital Group Inc. since 2003.
Lynn has about 40 percent of the mutual fund's $2.2 billion invested in companies in the so-called emerging economies. That compares with an average 5 to 10 percent for most competing international funds, said Gareth Lyons, an analyst at Morningstar Inc., the research firm in Chicago.
Janus Overseas rose 27 percent in the past 12 months, ranking second, after Saturna Investment Trust, of 126 similarly managed funds tracked by Bloomberg. The fund remains an underperformer over the past five years, placing 78th of 90 funds, after declining at an annual rate of 6.3 percent. It closed Friday at $25.94 a share.
Lynn said in an interview that he invests in "the heavy hitters of their industries" -- those with market values of more than $10 billion that are reporting higher profit growth than their rivals. His fund has stakes in about 80 companies.
The biggest holdings include India's Reliance Industries Ltd., which runs the world's No. 3 oil refinery; Brazil's Cia. Vale do Rio Doce, the world's largest iron-ore producer; and Kookmin Bank, South Korea's biggest lender.
Lynn has doubled the proportion of assets that the fund has in the emerging markets since he took over as sole manager from Helen Young Hayes two years ago. Hayes stepped down as investors withdrew money from Janus's funds because of subpar performance. The company has had net redemptions every month since June 2001.
"It's a big bet," said Morningstar's Lyons. "It's going to make the fund more volatile, but often the further you stray from the crowd, the better chance you have to outperform the crowd."
Since October, Lynn has bought more shares of Vale do Rio and Kookmin Bank. The emerging markets have been benefiting from economic growth and low interest rates, which have boosted consumer spending.
India's economy, for instance, expanded 6.8 percent in the first quarter, compared with 3.8 percent growth in the United States and 0.5 percent in Britain.
Templeton Asset Management Ltd.'s Mark Mobius, who oversees $17 billion in emerging-markets assets, last month said he favored stocks in Brazil, South Korea and Turkey on optimism about the economies and the outlook for corporate earnings.
The Morgan Stanley Capital International Emerging Markets Index, a measure of stocks in 26 countries, jumped 36 percent in the past year, more than doubling the 13 percent gain of the MSCI EAFE Index, a broader benchmark for international markets.
Companies in the emerging-markets index -- which includes Eastern Europe, the Middle East, Africa, Asia and Latin America -- probably will increase profits by an average of 12.5 percent this year, according to estimates from analysts at UBS AG.
Shares of Reliance Industries, the fund's biggest holding, gained 57 percent in the past year. The company has reported eight straight quarters of record profit. Its stock reached an all-time high last month after brothers Mukesh and Anil Ambani agreed to split ownership of the company to resolve a feud.
"Energy conglomerates in India have extremely exciting long-term double-digit growth prospects," Lynn said in a telephone interview from Bombay, one stop of a business trip that has taken him to Tokyo, Taipei and Bangkok.
Lynn also has been bullish on commodity stocks. Rio de Janeiro-based Vale do Rio is the fund's No. 3 holding. The company is benefiting from rising iron ore prices prompted by demand from Chinese steelmakers. Shares of Vale do Rio rose 55 percent in the past year.
The fund has increased investments in Samsung Electronics Co. and Kookmin Bank since October.
Samsung, whose shares are up 33 percent in the past year, widened its lead as the world's largest maker of flash-memory chips used in consumer electronics last year, according to market researcher ISuppli Corp.
Shares of Kookmin Bank also have gained, rising 25 percent so far this year. The company in May said it expects to double its net income to $1 billion this year.
Lynn, who joined Janus in 1991, holds economics and industrial engineering degrees from Stanford University. After graduating from college, he spent two years teaching math and English in Nepal through the Peace Corps.