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Manager of this market-beating fund finds success despite not being a 'gunslinger' like his dad

  • Pin Oak Equity has returned 13 percent annually to investors over the past 10 years.
  • Manager Mark Oelschlager insists on keeping a diversified portfolio, with two of the fund's major holdings including Charles Schwab and Amazon.
  • "We expect them to grow their operations consistently over a very long time," Oelschlager tells CNBC.
Mark Oelschlager, Pin Oak Equity Fund
Source: Pin Oak Equity
Mark Oelschlager, Pin Oak Equity Fund

Mark Oelschlager, manager of the Morningstar five-star rated Pin Oak Equity fund (POGSX), learned a lot from his father about managing a portfolio but has found success by taking a slightly different approach.

"He's more of a gunslinger than me. It's usually the other way around. The kid is the one taking risks. But I'm usually the one reining him in," Oelschlager told CNBC in a phone interview. "If it were up to him, he'd risk it and hold just a handful of stocks, while I'm consistently trying to get more diversified."

Oelschlager took over as the fund's principal manager in June 2006 from his father, James, who had managed it since its inception in 1992.

The son's approach has yielded strong results. The fund has posted annualized returns of 13.5 percent and 15 percent over the past three and five years, respectively. It has also returned 13 percent annually to investors over a 10-year period.

The fund ranks in the first percentile of the "large-blend" category over those time periods, outperforming others in the group and the broader market. It is also outperforming the market in 2018, posting a year-to-date return of 1.6 percent.

The fund's assets under management also rose 172 percent between fiscal 2013 and 2017, and now totals more than $200 million, according to the fund's latest prospectus.

To achieve these results, Oelschlager takes a page out of Warren Buffett's investment playbook, incorporating the idea of "being greedy when others are fearful" into his strategy.

"The biggest thing I think about is: Do I want to add risk or take off risk? So when everyone was fearful during the financial crisis, for example, we added risk because of all the opportunities available," Oelschlager said, noting the fund took a big position in the financials sector in the aftermath of the crisis. "That's paid off over the last couple of years."

Oelschlager also insists on keeping a diversified portfolio, with two of the fund's major holdings including Charles Schwab and Amazon.

"There are a lot of companies that get into a hot business and ride that wave for a while but don't last long because they can't keep competition at bay," he said. Schwab and Amazon "aren't often compared side by side, but they are similar in that they've built platforms that allow them to keep growing."

Shares of Amazon and Schwab have been on a tear over the past year, rising 76.9 percent and 28.4 percent, respectively, through Friday's close. Oelschlager said both stocks are good stocks to hold long term.

"We expect them to grow their operations consistently over a very long time," he said. "They offer their customers a value proposition to what their competitors can offer."

Schwab is one of the fund's top five holdings, along with Bank of New York Mellon, Alphabet Class C, PepsiCo and Paychex, as of year-end 2017.

Oelschlager joined Akron, Ohio-based Oak Associates in 2000, 15 years after it was founded by his father, James.

The elder Oelschlager still works in the firm as co-chief investment officer and manages the White Oak Select Growth Fund (WOGSX), which is rated four stars at Morningstar.

"I've learned a lot from him over the years, but I've also figured out how to do things my own way," the younger Oelschlager said.