Investors in the 1990s came to love charismatic CEOs like Jack Welch, but the whole CEO cult may have gotten out of hand. "Over ten years, management shouldn't matter that much," says Golub, "because CEOs don't last ten years and laggard CEOs get replaced."

It may seem incongruous, but in certain commodity businesses like financial services, management really can make a huge difference. "In financial services, everybody is basically selling the same product," Wilby says.

The financial services CEOs who really understand capital allocation possess a huge advantage. He cites Fred Goodwin of Royal Bank of Scotland, Sandy Weill of Citigroup and Jamie Dimon of Bank One (which recently acquired JP Morgan Chase). "He [Dimon] understands capital allocation, and his goal is to overtake Sandy Weill because he used to work for him," Wilby says.

Some of the trickiest situations in big-cap investing involve turnarounds. That's because many turnarounds never materialize. And if an investor waits until it does become reality, they are usually too late.

One of Wilby's bigger turnaround success stories was investing in British Petroleum 14 years ago. "BP has collected a great portfolio of assets, some in pretty ugly zip codes," he says. "They understood the problem of declining production in non-OPEC areas, and they were early and astute in getting into Russia."

Wilby, a global investor, is starting to find several other turnarounds outside the United States. Ericsson, the Swedish cellular telephone manufacturer that was outmaneuvered by Finland's Nokia in the 1990s, is staging a dramatic comeback. "They've finished an enormous amount of cost-cutting and they are positioned for a turnaround in 3G spending," he asserts.

Signs are surfacing that workers in Germany and France are suddenly ignoring the wishes of their union bosses and politicians and voting to extend their workweeks. "Workers in Europe have said in the last few months that they are willing to work longer for less money to keep their jobs," Wilby says.

One of his favorite plays is Siemens, the giant German electrical manufacturer. "They are in great businesses, wireless handsets and semiconductors, and there are huge costs that can be taken out of this company," he says.

Figuring out what large company stocks to avoid may be just as much of an art as deciding what to buy in the next five years. Looking at yardsticks like free cash flow and return on invested capital can offer investment managers some important screens. Speaking on this subject at Morningstar's annual conference this past June, Selected Funds' Chris Davis cited the importance of return on invested capital. If Motorola had managed to earn a reasonable rate of return of 10% on its invested capital over the last ten years, it would be earning $1.50 a share today, not a measly 40 cents.

In general, many managers are leery of commodity businesses like paper, steel, airlines and, more recently, telecommunications. "The telecom business has too many players, too much capacity and too little earnings growth," argues Alexander, manager of The Hartford Stock Fund. As with all commodity businesses, it becomes very hard for different companies to differentiate themselves on anything besides price, creating a contest to become a low-cost provider.