Pick: Microsoft (MSFT)
Matthew McLennan joined First Eagle in September 2008 and has run the $33 billion (assets) First Eagle Global Fund (SGENX) since famed investor Jean-Marie Eveillard stepped back in early 2009. (The two ran the fund together for the first six months.) The fund -- which has returned an average annualized 11.0% for the past three years, vs. its category's 8.6%, according to Morningstar -- has an unusual allocation strategy: roughly one-quarter in cash and gold and nearly three-quarters in stocks picked with an emphasis on capital preservation. Microsoft, the fund's third-largest equity position, offers the margin of safety that McLennan craves. Trading at 10 times profits, "the business is priced as if it's going to shrink over time," he says. In reality, Microsoft enjoys the dominant global position in corporate technology and brings in huge recurring licensing fees. Microsoft may lack pizzazz, but $28 billion in operating profits in the past 12 months counts for something. "Everyone knows the imperfections of Microsoft," McLennan says. "But there's a mismatch between the price and the prospects."
--A.F.
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