Reopened funds: Buy while you can?

The one caveat: Though the offerings' assets have shrunk recently, they are still among the largest funds in their respective categories.

Their deep, experienced staff of analysts and managers, and contrarian styles, enable them to manage large sums better than most funds, but posting the kind of outperformance they have for most of this decade could be more challenging in the future.

These are among the first funds I recommend to friends and family, but I'll probably take a pass on them because I'm happy with my current large-capitalization holdings, which already own many of the same stocks in similarly priced or lower-priced funds.

Longleaf Partners

This fund's managers are seasoned, and their deep-value approach is uncompromising. The fund's opportunity set is unbounded, its expenses are reasonable, and its stewardship is unimpeachable. Its bold and concentrated portfolio of about two dozen stocks is unlikely to look or act like any diversified core holding you have in your portfolio. It has one of the lowest correlations with the S&P 500 Index ($INX) in the large-blend category.

So, it's an excellent selection for those who already have secured their core stock exposure via cheap index funds or more-diversified active funds. And they are seeking a manager who can add a little outperformance to their portfolios. You have to be willing and able to ride out the offering's many fallow periods, though.

Managers Staley Cates and Mason Hawkins are among the most committed long-term value investors around. But it can take time for their out-of-season selections to ripen, and its top-10% long-term record is pocked with periods of bottom-quartile performance, such as 1999, 2004, 2005 and the past year and a half.

I would have no problem making room for this fund in my portfolio, but, if I had to choose among the three examined here, I'd probably select the next fund. Read on to see why.

Sequoia

The only reason this fund has never been an Analyst Pick is that it was closed and seemed unlikely to open the day we started publishing Analyst Picks back in 1999.

It has many of the same qualities as Longleaf, such as concentration, low turnover, an intense focus on fundamentals, decent fees and a willingness to look dramatically different than conventional benchmarks. It, too, has one of the lowest correlations with the S&P 500 in the large-blend category and would be a fine candidate for a supplemental, alpha-generating holding.

There are some important distinctions, though. Managers Bob Goldfarb and David Poppe are not as intent on buying stocks at deep discounts as are their counterparts at Longleaf. Goldfarb and Poppe are Buffettologists who want to buy well-managed companies with competitive advantages at good prices.

The fund's long-term results have been as lumpy and rewarding as Longleaf's but with less volatility. This fund has never owned technology stocks, however, while Longleaf has been willing to if the price looked right.

Finally, Sequoia is best owned in a tax-deferred account because it has a huge potential capital-gains exposure representing 41% its assets, so even though it trades infrequently it's sure to generate distributions when it does. Because I do most of my investing in tax-sheltered accounts, I'd probably opt for this fund.

Scarcity also is an issue. Who knows how long this great fund will be open and if it will ever be available again in my lifetime after it closes again?

This article was reported and written by Dan Culloton for Morningstar.

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