The fund ranked fifth among 105 funds tracked by Bloomberg that focus on sales and earnings growth and invest in companies with market values of $1 billion to $25 billion.

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William Nolin added to his Principal MidCap Fund’s second-largest holding, Gentex, after the shares dropped last year. He cited Warren Buffett’s strategy as the inspiration for the purchase.

“Buffett’s thinking is the stock price will follow a good business,” said Nolin, who personally owns shares of the billionaire investor’s Berkshire Hathaway. “We look for the best businesses in an industry at a good bargain.”

Shares of Gentex, the world’s largest maker of automatic dimming mirrors for cars, fell 16 percent in 2004 on concern about slumping sales at General Motors, the company’s largest customer.

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This year, Principal MidCap has lost 0.9 percent as Gentex slipped another 13 percent. Even so, the $567 million fund has performed better than two-thirds of its competitors. Nolin said he follows Buffett’s practice of being a “patient, long-term investor.”

The fund owned 369,600 shares of the company based in Zeeland, Mich., as of Jan. 31, up from 338,200 shares three months earlier, according to filings made with the Securities and Exchange Commission. The stake amounts to 2.2 percent of assets.

“I like that kind of strategy of focusing on companies with a competitive advantage,” said David Kathman, an analyst at Morningstar, an industry-research firm in Chicago.

“That tends to do pretty well over the long term.”

Signing the menu

Principal MidCap, run from Des Moines, Iowa, rose at an average annual rate of 10 percent during the past three years.

The fund ranked fifth among 105 funds tracked by Bloomberg that focus on sales and earnings growth and invest in companies with market values of $1 billion to $25 billion.

The group’s top performer, the Synovus Mid Cap Value Fund, advanced at a 13 percent annual pace. The average fund in the category rose at a 4.9 percent rate.

Nolin became a Berkshire investor in 1999. Since then, he has attended the company’s annual meeting in Omaha, Neb., every year.

The fund manager said he met Buffett there once, at an autograph signing five years ago, and got Berkshire’s chief executive to sign a restaurant menu bearing his caricature.

“A lot of us can make things very complex, but for him investing is buying a small piece of a business and knowing what you’re paying for it,” he said.

The fund manager said he doesn’t own Berkshire in Principal MidCap because its market capitalization is too large.

Berkshire is valued at $133.3 billion.

Other fans of Buffett include Richard Pzena, co-manager of the John Hancock Classic Value Fund; Wallace Weitz, manager of the Weitz Value Fund; and Larry Pitkowsky, co-manager of the Fairholme Fund, which has about 15 percent of its $405 million in assets invested in Berkshire.

TCF’s prospects

Principal MidCap’s biggest holding is TCF Financial, which operates 430 banks in six states, including Illinois and Michigan. The stake accounts for 2.4 percent of assets.

The company, based in Wayzata, Minn., has been the fund’s biggest holding for the past two years, Nolin said.

The stock has jumped 51 percent from its 2003 low, reached March 12, exceeding a 46 percent advance in the Standard & Poor’s 500 Index for the period.

TCF Financial’s earnings will climb 7.5 percent this year to $2 a share, a ninth increase in 10 years, according to the average estimate of analysts surveyed by Thomson Financial.

Nolin said he likes Gentex because the company’s earnings are also poised to rise.

Profit may climb to $1.48 a share this year and $1.72 next year from $1.44 a share in 2004, a Thomson survey of analysts showed.

“The exciting thing to us is that it’s not an exciting industry, but the company has tremendous potential of growing its sales over time,” he said. “They’re signing up virtually every automaker.”

“We like leaders”

Gentex sold almost 12 million dimming mirrors in 2004 and accounted for about 80 percent of industry sales.

About a third comes from GM, the world’s biggest automaker, which forecast its largest quarterly loss since March 16, 1992.

Sales will increase 6.1 percent this year, to $536.3 million, and reach $612 million in 2006, according to the average estimate of analysts in a Thomson Financial survey.

Nolin also favors Cintas, the largest U.S. supplier of uniforms to airlines and hotels.

The Cincinnati company has a 30 percent share of the country’s uniform industry.

For the fiscal year ending in May, it’s projecting earnings growth of as much as 11 percent to $1.75 a share.

“We like the leaders,” Nolin said. “This is a solid company that is on the upswing.”

The shares have fallen by 12 percent in the past year, making them an attractive investment considering the prospects for growth, he said.