William F. D'Alonzo's Brandywine Blue Fund rose twice as much as the Standard & Poor's 500-stock index in the past year by choosing just 30 stocks and selling them before they peaked.
D'Alonzo shed Chicago Mercantile Exchange Holdings Inc., the fund's biggest investment, in the last week after the stock climbed 29 percent in three months.
He has boosted his stake in Nabors Industries Ltd., the world's largest onshore oil and natural gas drilling contractor, by 50 percent and purchased shares of Intel Corp., the largest semiconductor maker, and retailer Bed Bath & Beyond Inc.
"We buy full positions and we sell full positions," D'Alonzo, 50, said in an interview from his offices at Friess Associates LLC in Greenville, Del.
The Brandywine Blue Fund climbed 29 percent in the past 12 months, ranking 15th of 225 competing stock funds tracked by Bloomberg. The S&P 500 gained 11 percent in the same period. The top-performing "multi-cap growth" fund was Hennessy Advisors Inc.'s Hennessy Focus 30 Fund, up 46 percent.
D'Alonzo overhauled the fund more than once in the past 12 months and the average annual turnover for the past three years was 216 percent. That's more than double the industry average, according to researchers at Chicago-based Morningstar Inc.
D'Alonzo also owns far fewer stocks than competing equity fund managers who hold 145 on average.
The Brandywine Blue Fund invests in companies with market values of more than $6 billion that D'Alonzo expects to report quarterly earnings increases of at least 20 percent.
Eighty-five percent of the Friess Associates' assets are in shares of companies that met or beat analysts' estimates in the most recent quarter, he said.
Friess Associates, a unit of Beverly, Mass.- based Affiliated Managers Group Inc., started the Brandywine Blue Fund in 1991 after assets of the firm's first fund, the Brandywine Fund, doubled in six years.
Brandywine Blue requires a minimum initial investment of $10,000. The company's 70 employees are the largest shareholders of the three Brandywine funds.
In addition to earnings estimates, D'Alonzo evaluates what he calls a company's "sizzle factor." That may include the introduction of a product or a change in management strategy.
He devoted 5.3 percent of the fund's assets to the Chicago Mercantile Exchange in June, after the futures market said daily trading rose 47 percent to a record in April, boosted by speculation about how much higher the Federal Reserve will increase its target for overnight lending between banks.
The fund sold all of its shares in the past week. The stock closed Friday at $269 a share.
"It had a pretty nice move, but we had some competing ideas with possibly more upside," said D'Alonzo, a graduate of Widener University in Chester, Pa.
Since Sept. 30, D'Alonzo has doubled the fund's stake in Nabors Industries to 4.9 percent in June. The company's second-quarter profit almost tripled as oil and gas producers hired more rigs at higher rates.
Nabors's customers have been expanding exploration amid soaring energy prices. Crude oil futures on the New York Mercantile Exchange surged to $68 a barrel during trading Thursday, the highest since trading began in 1983. Shares of Nabors, which ended the week at $64.02, are up 50 percent in the past year.
Brandywine Blue has about 17 percent of its assets in energy companies, almost triple the average for large-cap growth funds, said Karen Papalois, an analyst at Morningstar.
"They make some pretty bold moves," she said. "The risk is they could get one of these calls wrong and it will hurt."
D'Alonzo, who is also chief executive of Friess Associates, was hired by Foster Friess in 1981. He has helped manage the Brandywine Blue fund since it opened 14 years ago.
He initiated positions in handset maker Motorola Inc., as well as Intel and Bed Bath & Beyond during the second quarter.
He sold shares of Brazilian iron-ore producer Cia. Vale do Rio Doce, construction equipment manufacturer Ingersoll-Rand Co. and Starwood Hotels & Resorts Worldwide Inc.
"We don't have an arrogant attitude about selling," said D'Alonzo, who spent a week this summer hunting bears and mountain lions in New Mexico, killing one black bear. "If we make a mistake, we move on."
While buying and selling stocks raise shareholder costs, D'Alonzo said higher returns compensate for the higher expenses. The fund's expense ratio is 1.12 percent, less than the 1.5 percent average for rival funds, data compiled by Bloomberg show.
"We try not to be penny-wise and pound-foolish," he said.