Most funds are eager to tout their returns and track record of success. But this small-cap offering has avoided the limelight as it has racked up impressive gains.

Fund managers like to pick up underperforming stocks that still have some pop. But how many mangers are willing to bed on the S&P 500’s worst-performing stock? Dean Foods (NYSE: DF) held this dubious distinction in 2010, as volatile milk prices drove the Dallas-based company’s stock below book value. Over the course of 2010, the stock fell by close to 51 percent.

Homestead Small-Company Stock (HSCSX) established a position in Dean Foods last year, sensing a classic value play in the US’ largest milk distributor. At the end of the second quarter, Homestead had built up a 3.6 percent stake in Dan Foods. By late July, Dean Foods’ stock had gained more than 27 percent in 2011.

Homestead Funds was established in 1990 by the National Rural Electric Cooperative Association (NRECA), a trade association for US non-profit, rural electric utilities. Homestead Funds was created as an open-end mutual fund company to give employees at those utilities access to inexpensive, sound money management. Homestead Small-Company Stock, which launched in 1998, has steadily attracted the attention of registered investment advisors and retail investors by word of mouth and superior returns.

“We don’t do a lot of marketing and we’re comfortable with the growth of the fund,” said Peter Morris, Homestead Funds’ president and co-manager of Homestead Small-Company Stock. “It’s grown slowly and we’ve turned down a number of requests for disproportionately large amounts of money. The fund is still relatively unknown.”

 Despite a rocky year in 2008—the fund lost 34.3 percent, slightly outperforming the S&P 500’s 37 percent loss—no one could argue with Homestead Small-Company Stock’s long-term performance. The fund’s 10.1 percent gain for the trailing five years puts it in the top 2 percent of Morningstar’s Small value category. The fund has returned 16.3 percent over the trailing three years, compared to an 8.9 percent gain for its category.

Management applies a generalist’s approach to picking underperforming stocks that have run up against operational difficulties. This stock picking strategy often leads management to names that aren’t covered by Wall Street analysts. This lack of coverage may require Homestead to meet frequently with a company’s management as they evaluate the firm. Once homestead’s management decides to buy into a stock they’ll stick by their guns; the fund has a remarkably low turnover rate of 4 percent.

Wisconsin-based Manitowoc (NYSE: MTW) is a manufacturer of large cranes and a broad range of food service equipment. A series of pre-credit crisis acquisitions left the company’s balance sheet in dire straits when the bottom fell out of the credit markets. In 2008, the stock plummeted under $3 from close to $50 in the final days of 2007.

“We owned Manitowoc in the past, we knew management. We thought the only reason that the balance sheet was leveraged to that extent was because of what happened in the economy,” Morris said.

The balance sheet was in tatters, but the business remained sound. Manitowoc’s crane business line had significant exposure to overseas markets, particularly in developing nations. Meanwhile, the servicing contracts from the company’s ubiquitous icemakers provided Manitowoc with a reliable source of cash flow.

Years later, Manitowoc is back from the brink. But the business has yet to fully recover. The company posted a $52.4 million net loss in the first quarter, compared to a $23.2 million loss the previous year.

However, there were bright spots in the first-quarter results. Revenue rose to $732.2 million in the quarter compared to $684.4 million the previous year. The company’s crane segment racked up an $800 million order backlog, up 40 percent from the previous quarter. Operating margins rose to 3.2 percent from 1.2 percent the previous year. Additionally, Manitowoc’s stock has gained close to 24 percent year to date.

Small-cap stocks have enjoyed a strong tailwind since the credit crisis, and Morris said that Homestead Small-Company Stock is drilling down into smaller companies to uncover value—a handful of portfolio holdings have revenue of less than $500 million. Despite the run-up in stock prices and valuations, management is confident that it can stay true to its mission of uncovering small-cap value plays that will reward shareholders.

“There’s been a decade of massive outperformance in small caps and we’re very mindful of that,” Peter Morris said. “But there’s still value there. You’ve just got to dig for it.”