Joe Milano
Joe Milano
Joe Milano
Manager tenure: 9 years
Fund type: Large-cap growth
Expenses: 0.83%

His picks

Fastenal: "The industrial supply manufacturer came up with a vending machine that keeps track of safety equipment like gloves or goggles, allowing companies to manage costs. The business has been growing about 20% a year for the past two years."

Fiserv: "This midcap name, which provides processing technology to community banks and credit unions, is expanding, and profits are growing faster than revenue since management is cutting costs. Its earnings can increase in the double digits."

UPS: "As global trade increases, UPS's business grows. The company has been able to raise prices every year because it has limited competition. UPS has a great balance sheet; it buys back a bunch of stock, and it delivers a 3% dividend yield."

Secret of success

With Apple poised at the top of his portfolio, Milano might not seem so different from his peers -- that is, managers who buy large companies with the ability to expand earnings. Dig deeper, though, and you'll find his strategy is far from run-of-the-mill.

Since he's seeking stocks to hold, Milano is more disciplined than many growth investors. He looks for not only double-digit earnings growth potential but also low debt and price relative to how much cash the company can generate in the future. Because of this restraint, the fund fared better than its peers in 2008.

Milano doesn't limit himself to just large-caps either. About a third of his portfolio is in firms with stock market values from $2 billion to $10 billion. "We use large-caps as anchors, then take a little more risk with the rest to get more growth," he explains. This helped the fund enjoy a nice rebound in '09, when midcaps bested blue chips.

Where he sees opportunity

Milano forecasts a long period of very slow growth." Increasing revenue alone might be enough to drive appreciation in a better climate, he says. But today he wants to see that a company is also widening profit margins (by cutting costs, for instance) and using cash wisely (say, by expanding or making smart acquisitions). Milano notes that companies fitting this bill are not specific to any sector today.

Laura Lallos @Money - Last updated January 23 2012: 6:40 PM ET
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