Where the Thrills and Chills Will Be in 2011

DFA's $3.5 billion US Micro Cap Portfolio benefited from a 58% increase in Valassis Communications, a media and marketing-service company with a growing online business, and revived shoemaker Steve Madden, which soared more than 46%. The fund itself gained 31.29%, in large part because it always stays invested. DFA's low-turnover system as well doesn't run up huge brokerage commissions and it as well uses strategies, like lending out its portfolio securities to other firms, to generate income. It at times will buy proxies, like futures and options on futures contracts for U.S. equities and indexes, to give itself exposure to areas without paying up to buy the shares. The micro-cap fund sticks to the smallest 4% of domestic stocks and tries to trade them discreetly to avoid roiling an illiquid market.

Overweight to small-

"We had an overweight to small- and mid-cap compared to most of our peers. And small-cap and mid-cap doubled up on large-cap," says Patrick Egan, director of asset management. Two stocks that boosted returns were cloud-computing darling F5 Networks and fast-growing semiconductor maker Atmel.

"We are looking to large-cap growth, with a bias to dividend-producing research stocks," he says. Even mega-cap stocks look cheap compared to the rest of the market, says Egan. The Thrivent team likes EMC, Oracle, and Google not only for their valuations now because the tech spending cycle is on an uptrend.