When the Matthew 25 Fund fell 40 percent in 2008, it kept Mark Mulholland awake at night.

Mulholland, the founder and sole manager of the mutual fund -- named after a Bible passage -- says he would lie in bed thinking about the damage he had done to his investors, particularly the elderly whose nest eggs might not recover before they died. The assets he managed dwindled to $22 million from $115 million, Bloomberg Markets will report in its May issue.

What Mulholland didn’t worry about were the stocks in his portfolio.

“The companies we owned were so cheap that barring a total collapse of the economic system, I knew at some point we were going to make a lot of money,” he says.

That time has come. Mulholland, 53, bought smartphone maker Apple Inc. in 2008 for $80 to $128 a share. He also hung onto his investment in companies such as Sidney, Neb.-based Cabela’s Inc., a retailer of hunting and fishing products, and Medina, Minn.-based Polaris Industries Inc., which makes all-terrain vehicles.

The rebound in those stocks helped propel the now-$452 million fund to gains that beat the Standard & Poor’s 500 Index by a wide margin. The fund returned 13.1 percent annualized during the five years ended on Feb. 15 compared with 4.7 percent for the S&P 500. Matthew 25 gained 26.8 percent over three years and 25.4 percent in one year.

Being No. 1

Those results make Mulholland’s fund No. 1 in the U.S. diversified stock category in Bloomberg Markets magazine’s annual ranking of mutual funds.

“Mark is the best investor around that no one has ever heard of,” says Steven Roge, a Beverly, Mass.-based financial advisor who owns shares of the fund.

The ranking of stock and bond funds includes U.S.-domiciled funds with more than $250 million under management as of Feb. 15. Funds are ranked by total returns for one, three and five years and by their Sharpe ratios for three and five years.