Stock fund results show surprises

July 13, 1994|By Andrew Leckey | Andrew Leckey,Tribune Media Services

Give your trusty money market fund and bank certificate of deposit great big hugs.

Even their modest yields beat the 5.84 percent decline posted by the average stock mutual fund in the first half of this year.

The importance of diversifying holdings among different types of funds, rather than simply jumping from one bandwagon to another, is evident in the latest stock fund results.

Last year's darlings, the emerging market and Latin American funds, have stumbled badly. So have gold-oriented and environmental funds. But the once-downtrodden Japanese stock funds have come alive, thanks in part to a stronger yen that translated into more dollars. Natural resources funds, boosted by rising oil prices, are also gaining.

"We're still in a down market, but there can be sharp rallies off of it and long-term positions should be held," said A. Michael Lipper, president of Lipper Analytical Services, which compiles the fund data.

While he'd be selective, Lipper said he believes fund groups such as Latin America, down 11 percent this year, might be terrific places to "start nibbling."

Japan is shaking off a four-year slump.

"The Japanese stock market has begun to recover and is outperforming the United States, Latin America and the rest of the Asia Pacific region," pointed out Shigikazu Kurashima, chairman of Nikko Capital Management, whose Capstone Nikko Japan Fund ranks first this year.

Even Japanese institutional investors who had been selling Japanese stocks now realize they're a good place to be, he said. Electronics firms Omron and ALPS, as well as chemical companies Asahi Chemical and Sumitomo Bakelite, helped propel the fund.

"The fact the yen appreciated 11 percent against the dollar and the Japanese market rose 16 percent both helped," added Seung Kwak, portfolio manager of the Japan Fund, which ranks fourth this year.

The Japanese market is being driven by anticipation of economic revival, though the question remains whether that recovery will actually come through.

A smart stock picker can find success even in a group such as technology which isn't prospering.

"We went to 40 percent cash in February, which helped when a decline came in the technology group in March," said James Renck, portfolio manager of the Merrill Lynch Technology Fund, the only domestic stock fund to crack the top five this year.

Nervous about the overall market, Renck nonetheless believes a lot of negatives in his group are known already and prices are modest.

He's held just 15 stock names this year, the best of them Micron Technology, Creative Technology and Oracle Systems.

Top performers in the first half among stock funds with reasonable initial investment requirements, according to Lipper, were:

* Capstone Nikko Japan Fund, New York; $4 million in assets; 4.75 percent "load" (initial sales charge); $200 minimum initial investment; up 38.44 percent.

* Fidelity Japan Fund, Boston; $640 million in assets; 3 percent load that is being waived until July 1995; $2,500 minimum; up 28.34 percent.

* T. Rowe Price International Japan Fund, Baltimore; $172 million in assets; no load; $2,500 minimum; up 27.37 percent.

* The Japan Fund (Scudder Investor Services), Boston; $724 million in assets; no load; $1,000 minimum; up 23.04 percent.

* Merrill Lynch Technology Fund, Class "A," New York; $478 million in assets; 6.5 percent load; $1,000 minimum; up 22 percent.

In the second quarter, natural resources funds saw prospects improve.

"The movement of oil prices from $14 a barrel to more than $19, as well as natural gas sustaining higher levels, means drilling activity will be up," observed Bill Mankivsky, manager of Fidelity Select Energy Service, ranked second in the quarter. "But while demand should increase, this remains a volatile investment."

His best holdings were Wheatley TXT, taken over by Dresser Industries, and Smith International, which bought 64 percent of Dresser's drilling fluids business.

Highest returns for the second quarter were:

* Capstone Nikko Japan Fund, up 13.79 percent.

* Fidelity Select Energy Service, Boston; $84 million in assets; 3 percent load; $2,500 minimum; up 13.13 percent.

* Fidelity Select Home Finance, Boston; $291 million in assets; 3 percent load; $2,500 minimum; up 12.08 percent.

* Fidelity Japan Fund, up 11.53 percent.

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