First, she looks for companies trading at a discount to their earnings growth rate. For instance, if a company's earnings are projected to grow 25% a year for the next five years, she isn't likely to buy the stock unless its price-to-earnings ratio is well below 25.
Byrne also likes companies that have slipped up recently but whose recovery has yet to be recognized by Wall Street.
True, Westwood Balanced has under-performed thus far this year. It's gained just 4.2% year-to-date. But that's largely because the fund is over-weighted in energy stocks and real estate investment trusts--two high-yielding asset classes that are traditionally "defensive" holdings that have weakened sharply this year.
Still, defense is key right now. Concerned over Asia's economic woes, Byrne has about 60% of her fund in stocks (the fund is permitted to go as high as 70%) and the rest in bonds.
Her caution also extends to the bond side: She owns mostly high-grade government and corporate debt with low interest rate sensitivity.
* Janus Balanced (no-load; $2,500 minimum initial investment;  525-8983). Despite having less than half its assets in stocks, this $584-million fund has managed to beat more than 90% of its balanced peers over the past one, three and five years.
Manager Blaine Rollins follows a Janus tradition of seeking out companies with predictable earnings streams and growing cash flow. Recently, this has led him to asset management companies like Charles Schwab & Co. and cable stocks like Tele-Communications Inc., which AT&T Corp. plans to acquire.
Rollins also will invest in these companies through their bond issues. In recent months, for instance, Rollins has increased his stake in telecom and cable convertible bonds, which can be converted into the company's common stock. Convertibles now represent about 20% of the fund's assets.
Notes Rollins: "On down days in the market, these convertibles don't move down nearly as much. Yet they have great upside potential, and some are yielding as much as 7%."
High-yield bonds make up another 16% of Janus Balanced, and high-grade corporate bonds and U.S. Treasuries make up the rest of the portfolio.
Surprisingly, this mix has produced a fund that Morningstar considers to be 65% less risky than its peers. It also has produced a total year-to-date return of 15.2%--three times better than the typical domestic equity fund.
* Vanguard Wellington (no-load; $3,000 minimum initial investment;  662-7447). Investors seeking a traditional, predictable balanced fund will like this mammoth $24.7-billion portfolio.
Co-managers Ernst von Metzsch and Paul Kaplan maintain a 60%-40% split between stocks and bonds.
For stocks, Von Metzsch and Kaplan stick with value-oriented large-cap U.S. equities. (These should be easier to find today, thanks to the recent market correction.) As for bonds, Vanguard Wellington stays with U.S. Treasuries, which by definition are high-grade.
Over the past 15 years, this simple combination has led to average annualized returns of 14.4%, beating those of the typical domestic equity fund.
* UAM FPA Crescent (no-load; $2,500 minimum initial investment;  638-7983). As predictable as Vanguard Wellington is, Steven Romick's $269-million portfolio is not.
For starters, Crescent's 50%-or-so equity stake is mostly invested in small- and mid-cap stocks--unusual for a balanced fund.
To offset that volatility, Romick invests in some other unconventional assets.
For instance, he has been adding more convertible bonds to his portfolio--in particular so-called busted bonds, whose prices don't move in tandem with their underlying stocks, but which pay a decent yield.
Romick also will buy high-yield debt. And he has about a quarter of the fund's assets in cash right now.
On paper, this odd combination of small companies, convertibles and high-yield bonds would not appear to be among the safer approaches. Yet Morningstar considers Crescent to be a stunning 72% less risky than its peers.
Although so far this year his return is just 2.8%, the fund has earned 16.8% annually over the last five years.
* Capital Income Builder (5.75% load; $1,000 minimum initial investment;  421-4120). In addition to investing in short-term U.S. Treasuries, this $8.5-billion balanced fund dampens volatility by seeking out large U.S. companies that pay out steady dividends.
Thanks to this combination, Capital Income Builder has beaten more than half its peers in each full calendar year dating back to its 1987 inception.
At the same time, Morningstar considers this fund 58% less risky than its peers. The current asset mix: 65.2% stocks, 17.4% bonds and 16.8% cash.
The fund has earned 5.1% year-to-date and 14.8% a year over the last five years.
* Fidelity Puritan (no-load; $2,500 minimum initial investment;  544-8888). Like Capital Income Builder, this $25.1-billion fund favors high-yielding blue-chip names for its equity holdings.