AFTER 49 YEARS OF

watching the stock market, fund manager Don Hodges is confident he has seen it all: numerous bear and bull markets, an oil crisis, a junk bond implosion and a tech boom and bust. That experience comes in handy when he's trying to figure out the market's next move, especially after a 311-point drop like we saw this week.

"Subconsciously you pick up on patterns, like a computer that is constantly drawing on new data," says Hodges. "In these bad declines you go in and pick up the stocks that were the strongest [before the downturn]. They are always the ones to lead when the market recovers."

Simple rules like that have translated into big returns for the Hodges fund, a $705 million go-anywhere offering run by Don and his son, Craig, out of the family's investment shop in Dallas. The fund has more than doubled in size over the last year a Catch-22 that has been known to overwhelm small shops. But the duo has taken that growth in stride: Over the last 12 months, Hodges has returned 25.9%. More importantly, though, is the long view. Since its launch in 1992, it has raked in an average annual gain of 13.7%, more than three percentage points ahead of the Russell 2000 and two points ahead of the S&P 500.

And there lies the reason why Hodges makes our list of top performers since inception. For this week's screen, we looked for funds that exceeded an average annual return of 11% the historical return of the stock market since their launch. This screen is one of the toughest that we do all year because, after we're done giving priority to since-inception returns, we add in more recent results, cheap fees and management tenure over five years. Only 17 domestic equity funds make the cut. Most, if not all of them, would make excellent candidates for large portions of your portfolio. "Funds like these won't keep you up at night," says Scott Kays, head of Kays Financial Advisory in Atlanta.

If we had just limited our search to since-inception returns we'd be listing 169 funds. But we have good reasons for adding in the other performance criteria that knock out a majority of those offerings. First, we don't want to reward a new fund that may have gotten lucky right out of the gate or a hot one that benefited from a run-up in certain stocks. That's why you won't see sector funds, such as real estate or energy, on our list. We also don't want you investing in a fund whose best days were back in the 1990s or earlier, in some cases.

In addition, marrying consistent returns with a long-term manager who has proven their strategy in every market climate can be an unbeatable combination. "If a key person leaves, I get concerned," says Jeffrey Cribbs, president of Chicago Wealth Management.

FBR Small Cap rejoins the list because after being closed for several years it reopened to new money in January. Manager Chuck Akre, who has run this fund since its launch in 1997, favors three criteria when he debates picking a stock: a 20% or more rate of return on shareholder capital; sound management teams who reinvest the company's profits; and a cheap share price. He then holds on patiently turnover is a tiny 3% annually. The fund's top holdings include gaming concern Penn National Gaming and cell phone tower operator, American Tower. It has returned 17.9% since its inception.

As for the folks at Hodges, the father-and-son team has done well over the last three years. They've invested in railroads like Burlington Northern Santa Fe, a theme that was punctuated when Warren Buffett started to buy similar shares. Now they're moving on to two new ideas: deep sea drillers and airlines.

"Oil companies have to go deeper and deeper to find bigger pools of oil," says the senior Hodges. "There are just a handful of companies that can drill in those waters." He's built up considerable positions in drillers like Transocean, a stock that is up 38.6% year-to-date. Also on the buy list: Southwest Airlines since he thinks fuller planes will help boost the carrier's bottom line. That might sound contrarian give high fuel prices, but Hodges has piloted his fund through tough times in the past. We're betting he'll make another smooth landing.

The Criteria
The initial criteria for making this week's screen depended on a domestic equity fund having an average annual return since its inception that exceeded 11%. In addition, the contenders had to have above average performance over the trailing three-, five- and ten-year periods. As usual, we required minimum investments under $5,000, an annual expense ratio below 1.5% and the funds couldn't charge a load. Finally, the manager of the fund had to be in place for longer than five years.