(FORTUNE Magazine) – In the late 1990s, veteran value investor Don Yacktman was an investing pariah. The man who began the decade as Morningstar's Fund Manager of the Year finished it as Mutual Funds magazine's Flop of the Year. Why? In 1998 he got into a highly publicized proxy fight with his board of directors, who demanded that he keep his money in large caps, and he took heat for his decision to hold ailing old-economy stocks such as Philip Morris while tech stocks were soaring. Then, in '99, his eponymously named Yacktman (YACKX) fund had a horrendous year, falling 17%, while the S&P 500 rose 20%. Investors bailed: Assets in the fund fell from $1.2 billion to under $70 million.

But if success is the best revenge, Yacktman's is sweet indeed. As of late May, the fund has the best five-year record of 562 large-cap value funds tracked by Morningstar, with an annualized return of 19.4%. And investors are returning: The fund now manages $416 million.

How has Yacktman done it? "Consistency," he says. "What you see is what you get, whether it's 1995 or 2000 or 2005." Yacktman holds shares for an average of four to five years and makes relatively few bets-the top ten holdings plus cash make up a minimum of 50% of the fund. When evaluating a stock, he has three basic screens. First, he wants a low purchase price. What qualifies as low? He doesn't have a strict formula, but he decides by weighing a mixture of variables, including profitability, growth, and quality of the cash flow. Second, Yacktman scrutinizes how each company's management spends money. He looks favorably on those investing in growth areas of the business, repurchasing shares, and paying dividends. Finally, he avoids businesses such as airlines, with costly fixed assets. "I would classify most of the companies we buy as money machines that need a little oiling," he says.

At the moment, though, Yacktman says he's having trouble finding enough of those quality fixer-uppers. He has recently built up positions in beaten-down blue chips such as Pfizer, Colgate, and Cardinal Health. But he has more than 30% of the fund's assets in cash. His top holding right now is Coca-Cola (KO, $45), which he has been purchasing for the past two years. Yacktman is convinced it's going to pay off richly. And this time no one is arguing with him. - Ellen Florian Kratz