David Dreman scored big when cigarette makers won a court ruling blocking the U.S. government's claim to $280 billion of past profits. His $6. 1 billion Scudder-Dreman...

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David Dreman scored big when cigarette makers won a court ruling blocking the U.S. government’s claim to $280 billion of past profits.

His $6.1 billion Scudder-Dreman High Return Equity Fund has 10 percent of its assets invested in Altria Group, whose Philip Morris USA unit is the world’s largest maker of cigarettes.

The fund’s performance ranks first of 113 large-company stock funds tracked by Bloomberg in the past 10 years.

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The tobacco industry won a landmark victory Feb. 4 when a panel of an appellate court in Washington sided with the companies, ruling that the forfeiture of profits wasn’t authorized under the law.

The Department of Justice claimed the industry had misled the public about the dangers of smoking for five decades. Tobacco executives said the award, the biggest in history, would have bankrupted them.

“The litigation terrifies the market, but when we look at it, it isn’t as severe as people think,” said Dreman. “We spend an enormous amount of time looking at the litigation.”

Altria’s stock has more than doubled since 2000, when Dreman first bought shares of the company. Dreman’s fund has a higher percentage of assets invested in Altria than all mutual funds with more than $100 million to invest, according to Morningstar, an industry research firm in Chicago.

Reynolds American’s R.J. Reynolds Tobacco, Freddie Mac and Fannie Mae are among the Dreman fund’s 10 largest holdings.

The fund manager tries to make money from investors’ pessimism about companies that he perceives as having improving prospects.

As a “value” manager, he initially seeks out stocks with low price-to-earnings ratios that pay above-average dividends.

The fund typically holds fewer than 55 stocks at a time.

While keeping an eye on the tobacco trial, Dreman has had to deal with crises at other companies, most notably Fannie Mae, Merck and Pfizer. Share-price declines during the past year have tempered his fund’s returns yet he expects a rebound.

“Our firm has always tried to take advantage of investors’ overreactions,” Dreman said.