Stock Funds

Maybe plain-vanilla stock and bond mutual funds will do the job after all. Long-short funds - the newfangled mutual funds designed to give common investors a hedge fund experience and protection during downturns - recently went through one of their first major tests. And they flopped. In July and August, with investors concerned about subprime loans and a credit squeeze, the benchmark Standard & Poor's 500 stock index went down 9.4 percent. Long-short mutual funds - which are designed to hedge risk by betting on some stocks to rise and others to fall - went down 8.4 percent, according to Lipper Inc., a mutual fund tracking firm.

Five years ago, T. Rowe Price Group Inc. bet that investors were looking for a way to make retirement planning simple - a one-stop fund that would automatically adjust its blend of stocks and bonds to suit an investor's age. The firm's target-date retirement funds have paid it dividends, with investors pouring $2.6 billion into them in the fourth quarter, helping to lead the company to a 27 percent gain in profit for the three months that ended Dec....

T. Rowe Price Associates Inc.'s net income leaped 29.2 percent in the third quarter, and revenue hit a record $245.8 million, propelled by the robust stock market and a surge in revenue from investment advisory fees.The country's 10th-largest mutual fund company made $53 million in the first quarter, which ended March 31, compared with $41 million reported for the corresponding period of 1998. Diluted earnings per share increased 28 percent to 41 cents a share in the quarter, compared with 32 cents in the corresponding period a year earlier.

Seventy-five years and more than $5 trillion after the modern mutual fund was born, the fund industry is finally showing signs of age.For the first time in a decade, Americans' net new investment in stock funds declined last year from the previous year, industry data show.While mutual funds over the past decade may have been the greatest democratizing force in the history of Wall Street -- allowing investors with modest sums to ride the spectacular 1990s bull market -- the industry faces increasing competition for its mountain of dollars.

"IT'S TOUGH to argue with the success of buying an Internet stock that gained 966 percent in 1998," says Financial Perspectives. "It's also tough to argue with executing stock trades from the comfort of your own home computer for less than $10."But the publication also suggests that people shouldn't just jump onto the online bandwagon."For online trading, understand the considerable risks; don't risk `serious money'; don't borrow money for online trading; never buy stocks you don't know much about; keep taxes in mind; disregard rumors; use buy and sell `limit' orders," it warns.

Investors plunged back into stock mutual funds after pulling billions of dollars from them in August, and industry experts are hopeful the money will keep flowing this year.Executives at mutual fund companies are optimistic over what they have seen in 1999."The fund flows have been phenomenal," said Raymond A. "Chip" Mason, chairman and chief executive at Baltimore-based Legg Mason Inc., a diversified money management firm. "It has been wonderful."Assets in Legg Mason's 18 mutual funds have shot up to $15.4 billion under management as of Jan. 11, a 64 percent increase from a year earlier.

You might be worried if you found out that your equity mutual fund held more than 20 percent of its assets in a single stock. For many investors, that's putting too many eggs in one basket.But investors who seek extra diversification by owning several mutual funds often unknowingly do the same thing.In recent years, the stock market has rewarded fund managers who have selected a relatively few stocks -- notably giant brand-name stocks such as Dell Computer Corp., Merck & Co. and Microsoft Corp.

Individual mutual fund investors, who helped push the Dow Jones industrial average to record highs during its bull run, are pulling back from the diving stock market.T. Rowe Price Associates Inc. said yesterday that August marked the first month in more than five years that more money went out of the company's stock funds than came in."It is a change in direction," said Steve Norwitz, a vice president at Baltimore-based T. Rowe Price, who added that the last month the company's U.S. stock funds had net outflows was March 1993.

Sure it's a jungle out there in investmentland, but you can easily find your way with a good travel guide.I'm talking, of course, about the immense and ever-expanding world of mutual funds. To use the oft-quoted statistic, there are more funds than there are stocks on the New York Stock Exchange and Nasdaq combined -- more than 11,000 funds vs. about 9,400 stocks. However, a good fund guidebook will help you pare the list to a usable size. Many guides issue new editions in the spring, based on the previous year's data.

A raft of bad news sent the stock market tumbling yesterday amid worries that the economy is slowing, corporate profits are sagging and problems in Asia, Russia and Latin America are continuing to fester.Industry analysts also said that mutual fund managers scrambled to reshuffle their portfolios by dumping losing stocks to improve their performance, and that the market is still spooked by fears that the banking industry's problems could worsen.Investors were disappointed in the Federal Reserve's decision Tuesday to cut rates by just a quarter of a point to boost the economy, experts said.

T. Rowe Price Group's third-quarter profit dipped 13 percent as the Baltimore money manager's revenue from investment services fell. Still, the company reported Friday that clients continued to pour money into its mutual funds and other products, driving in $7.4 billion of new money during the quarter. Earnings beat Wall Street estimates of 46 cents per share based on a survey of 18 analysts by Bloomberg News. Shares rose $5.16 to close at $54.27 yesterday. Price Chief Executive and President James A.C. Kennedy said in an interview that the company is producing positive results for clients, noting that 87 percent of its funds outperformed their peers during a five-year period that ended Sept.

With tolerance growing for riskier investments, investors continued to put money into the stock market in the third quarter as nearly all Maryland-based mutual funds finished in the black. Despite the slumping housing market, mutual funds that invest in companies owning office buildings, apartment complexes and shopping malls turned in stellar performances. Nationally, real estate funds rose 32.5 percent on average from July through September and ranked as the best performers among those investing in specific industries, according to mutual fund tracker Lipper Inc. In Maryland, Baltimore's PNC Diversified Real Estate Fund gained nearly 38 percent, followed by the T. Rowe Price Real Estate Fund with a 33.7 percent return.

After a punishing 2008 and a poor first quarter, Maryland-based mutual funds bounced back in the spring as investors saw some good news amid the turbulence. All but one of the 166 Maryland-based stock funds tracked by The Baltimore Sun made money in the three months ended June 30, according to a Sun analysis of data provided by Bloomberg News. The exception was Ellicott City-based Hussman Strategic Growth fund, which lost less than 1 percent in the quarter. For the first half of the year, though, the fund gained 6.2 percent.

Legg Mason's star money manager Bill Miller appears to be bouncing back, much to the delight of investors who have stuck by him despite heavy losses during the past two years. Miller's Legg Mason Opportunity Trust was one of the top gainers among U.S. stock funds in the second quarter, surging 46 percent amid a spring market rally. And his flagship Value Trust fund rose 29 percent in the quarter. In an interview Thursday, Miller said the funds were positioned to expect a market rebound.

Thousands of investors bailed out on Legg Mason's Bill Miller last year as funds he manages plunged much further than the stock market overall. Not Steny H. Hoyer. The House majority leader from Southern Maryland proved as loyal to the famous Miller as he is to the pro-Israel lobby. He held on to shares in Miller's Legg Mason Value Trust fund worth $100,001 to $250,000 even as the value plummeted last year by 55 percent. A year earlier, the stake had been worth $250,001 to $500,000. Since Hoyer listed total assets worth only $148,000 to $447,000, he's taken a significant financial blow.

As stocks regain lost ground, financial planners say they're getting more calls from old and new clients asking much the same thing: Is it now time to dive back into the stock market? Some callers had bailed out of stocks last year in a panic and now have a bit of sellers' remorse. Others who uneasily stuck with stocks have found new courage to buy more since the widely followed Dow Jones industrial average has gone up nearly 30 percent since early March. David Berman, a financial planner with Berman McAleer Inc. in Timonium, says he has seen a shift in attitude within a matter of weeks.

The two best-performing Maryland mutual diversified stock funds were boosted in the first quarter by their holdings in consumer-oriented stocks, such as Apple and Amazon. Ellicott City-based Hussman Strategic Growth fund gained 7 percent while T. Rowe Price Group's New America Growth fund posted a positive return of 3.4 percent during the quarter. That may be surprising, given declining consumer confidence in a deepening recession. But consumers are still buying, just not as much. "Even though people seem to worry most about consumers, consumer spending has almost never declined materially on a year-over-year basis even in the current downturn," said John P. Hussman, the manager for his namesake fund, which also hedged its portfolio against the impact of market fluctuations.

The Wall Street rally last week provided a precious opportunity in a bear market: an exit door for people in need of cash. Typically, when the market has crashed like it has, the last thing investment advisers recommend is selling. They want people to hold on to solid stocks and stock funds and wait for a healthy market. But some people can't wait. They might have locked too much money up in stocks and need cash for bills. Sometimes people have more options than they realize and don't really have to sell.

While the average U.S. stock mutual fund plunged nearly 38 percent last year, the Hussman Strategic Growth fund based in Ellicott City limited its annual loss to 9 percent. The fund posted the lowest negative return among 157 Maryland-based stock mutual funds tracked by The Baltimore Sun, according to data provided by Bloomberg News. The Hussman fund, whose holdings included consumer brands such as Nike, Coca-Cola and Best Buy, lost 12.9 percent in the fourth quarter. That no Maryland equity fund was in the black in 2008 reflects a year with the worst stock market performance since the Great Depression.

City software firm won't pursue offering Metastorm Inc., a privately held Baltimore software provider, has pulled its public stock offering application. The 12-year-old company said it decided not to pursue the initial public offering due to "market conditions," according to a filing with the Securities and Exchange Commission last week. Weak economic conditions have blocked access to capital and credit. Metastorm, which provides software and other products that help businesses improve human and back-end processes and efficiency, had filed a registration statement in May to raise as much as $86 million through the offering.