What goes up must come down

Andrew Leckey

July 15, 1992|By Andrew Leckey | Andrew Leckey,Tribune Media Services

What goes up doesn't always keep on going up. Investors, in awe of the dramatic 35 percent average gain by stock mutual funds in 1991, poured $42 billion into such funds in the first half of 1992. Their reward, unfortunately, was an average first-half decline of 2.59 percent.

They could've done better in any old sort of investment that showed a positive return. But it could have been a lot worse.

"After last year's gain, it's normal to give some back," philosophized Michael Lipper, president of New York-based Lipper Analytical Services, which tracks the nation's funds. "This decline was actually a wash, although growth stock investments did do worse than others."

Funds specializing in financial services stocks, such as banks, savings and loans and insurance companies, fared best. Also prospering were funds targeting the right international growth markets.

"Everyone's looking at economic opportunities involving China, and the very best way to get involved is to buy investment-quality companies in the Hong Kong market," said Peter Donovan, president of Wright Investor Service, whose Equi-Wright: Hong Kong fund was up 34.74 percent in the first half to lead the pack.

Others benefited from that market.

"We have half our Newport Tiger Fund's holdings in Hong Kong stocks because we expect 22 percent earnings growth in those companies this year, which is better growth than Europe or the U.S.," said John Pasco, chairman of World Funds, whose Newport Tiger Fund rose 20.22 percent.

After a long slumber, S&L and bank stocks awakened. "What helped most was my bet on small New England savings banks in late 1991, a play on depressed earnings that paid off big," said David Ellison, portfolio manager of Fidelity Select Savings & Loan, which gained 29.27 percent. "Their valuations were so low that any whiff of good news sent them up."

"A decline in interest rates and non-performing loans really helped the bank stocks," said James Schmidt, portfolio manager of Freedom Regional Bank "B" Fund, up 22.69 percent. "There's also a takeover premium for many of them, since I expect the number of commercial banks to eventually decline from 12,000 to 5,000 through mergers and acquisitions."

Top-performing stock funds in the first half of 1992, according to Lipper, were:

* Equi-Wright: Hong Kong, Bridgeport, Conn.; $2.6 million in assets; no load (no initial sales charge); $1,000 minimum initial investment; up 34.74 percent.

* Fidelity Select Automotive, Boston; $112 million in assets; 3 percent load; $2,500 minimum initial investment; up 31.69 percent.

* Fidelity Select Savings & Loan, Boston; $95 million in assets; 3 percent load; $2,500 minimum initial investment; up 29.27 percent.

* Fidelity Select Regional Banks, Boston; $195 million in assets; 3 percent load; $2,500 minimum initial investment; up 26.19 percent.

* Sherman, Dean Fund, San Antonio; $2.7 million in assets; no load; $1,000 minimum investment; up 24.63 percent.

* Freedom Regional Bank "B," Boston; $49 million in assets; back-end load of 4 percent in first year decreasing to 1 percent by sixth year; $1,000 minimum initial investment; up 22.69 percent.

* Fidelity Select Financial Services, Boston; $109 million in assets; 3 percent load; $2,500 minimum initial investment; up 21.86 percent.

* World Funds: Newport Tiger Fund, Richmond, Va.; $85 million in assets; 5 percent load; $1,000 minimum initial investment; up 20.22 percent.

* Harris Associates: Oakmark Fund, Chicago; $40 million in assets; no load; $1,000 minimum initial investment; up 16.97 percent.

* Paine Webber Regional Financial Group "A," New York; $52 million in assets; 4.5 percent load; $1,000 minimum initial investment; up 14.98 percent.

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