Selected American Shares is one of those rare funds that keeps its turnover in the single-digit percentages. So you won't see the fund (symbol SLASX) chase the market fad du jour. Ken Feinberg, in an interview in late June at Morningstar's annual conference, in Chicago, outlined some of the big themes that he and co-manager Chris Davis are focusing on this year.

Feinberg says that multinationals that can deliver products and services to hundreds of millions of new members of the middle classes in emerging markets are especially attractive. So he likes Procter & Gamble (PG), which sells basic products such as Pampers and Head & Shoulders to consumers in these emerging nations. One service sector that grows explosively in developing countries is insurance, so Selected American has added to its large position in American International Group (AIG).

At home, Feinberg likes the prospects for pharmaceuticals. "We're all getting older, living longer and taking more pills," he says. The trouble is, he says, that big pharma companies have enormous gross profit margins and make easy targets for Democratic politicians. So he prefers to play the favorable demography through CVS Caremark (CVS), the leading retailer of drugs by store count. Drug retailers such as CVS actually benefit from the move to cheaper generic drugs, which are more profitable for them than branded drugs. Overall, Feinberg sees value in traditional large-cap growth stocks such as CVS, AIG and P&G.

In the first half of 2007, according to Morningstar, Selected returned 7%, essentially tying Standard & Poor's 500-stock index. Over the past five years, its annualized return of 13% beats the index by an average of two percentage points per year.

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