No, you have not died and gone to heaven.
But the 31 percent gain of the average stock mutual fund in 1995 made many investors feel as though they had done just that.
Following a rip-roaring first three quarters, the modest 3 percent gain of the average fund in the final period did represent a slowdown. Nonetheless, the much-anticipated fourth-quarter tumble by the technology group didn’t really drag all other stock funds down with it, as many had feared.
“Even if stock funds continue to go up in 1996, the odds are strong we’re not going to see another 30-percent-plus gain,” warned A. Michael Lipper, president of fund-tracking firm Lipper Analytical Services. “And I’m already concerned about 1997, for we’ll either have a president entering his last term or a new president, and Congress will be different, so there might be some negative tax consequences.”
Health and biotechnology funds were big winners in the fourth quarter, while Latin American funds took it on the chin. The year’s star funds were driven by technology, though managers were selling off the less attractive examples of that group by year’s end.
“As the most aggressive of our funds, our Capital Appreciation Fund through September had 50 percent of its portfolio in technology and also borrowed to leverage our assets more,” explained David Alger, co-portfolio manager of Alger Capital Appreciation Fund, the top-performing stock fund of 1995 with a gain of 78.57 percent.
“We then started selling tech and now are down to 30 percent, still high, but no longer including stocks with problems in their fundamentals.”
Alger deems the market to be undervalued and expects the Dow industrial average to exceed 6,000 this year.
“We own a lot of stocks from the upper Midwest and a lot of small-cap stocks, and were fully invested during a strong market year,” said Daniel Perkins, co-portfolio manager of Perkins Opportunity Fund, the No. 2 stock fund of 1995 with an increase of 70.35 percent. “We combine fundamental analysis with technical analysis, as we look for companies in which some change is taking place that can be a catalyst for the stock price.”
Perkins expects 1996 to be a good market year as interest rates continue to descend.
The best-performing stock funds in 1995 that are available to individual investors, according to Lipper, were:
– Alger Capital Appreciation Fund, New York; $49.5 million in assets; declining redemption schedule, no minimum initial investment; up 78.57 percent.
– Perkins Opportunity Fund, Minneapolis; $68 million; 4.75 percent load; $2,500 minimum; up 70.35 percent.
– Fidelity Select Electronics, Boston; $892 million; 3 percent load; $2,500 minimum; up 69.40 percent.
– Govett Smaller Companies Fund, Class A, San Francisco; $515 million; 4.95 percent load; $500 minimum; up 68.99 percent.
– Reserve Emerging Growth, New York; $3.5 million; 4.5 percent load; $1,000 minimum; up 67.46 percent.
Top funds in the past quarter benefited from special situations.
“The takeover of SCS Compute Inc., a small tax software company, by Canada’s Thompson Industries sent its stock from $2.75 a share to $6.75, and that one stock when we sold it represented 7 percent of our portfolio,” pointed out Robert Bruce, co-portfolio manager of the Bruce Fund, top stock fund in the fourth quarter with a gain of 25.05 percent and sixth-ranked for the year with an increase of 64.77 percent.
Best stock funds in the fourth quarter were:
– Bruce Fund, Chicago; $2.8 million; no-load; $1,000 minimum; up 25.05 percent.
– Dean Witter Health Sciences, New York; $352 million; declining redemption schedule; $1,000 minimum; up 18.97 percent.
– Montgomery Select 50, $26 million; no-load; $1,000 minimum (fund was initiated in October 1994); up 15.74 percent.
– Smith Barney Special Equities, Class A, New York; $180 million; 5 percent load; $1,000 minimum; up 15.53 percent.
– Franklin Global Health Care, San Mateo, Calif.; $22.5 million; 4.5 percent load; $100 minimum; up 14.25 percent.
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Andrew Leckey, who co-anchors the two-hour “Today’s Business” program each weekday morning on the CNBC cable television network, appears Sunday in Business, and Monday and Thursday in Your Money.
