Growth-Stock Funds Pace Quarter
Mutual funds specializing in growth stocks survived a late-June downturn to lead a generally strong performance by equity funds in the second quarter of 1989, but experts cautioned that the market is likely to slow through the rest of the year.
Two funds that target long-term Treasury bonds fared very well as a result of declining interest rates, although fixed-income funds continued to lag behind equity funds in overall performance.
At the bottom of the pile, meanwhile, languished precious metals and international funds, which were hit by a strong dollar.
A quarterly survey by Lipper Analytical Securities Corp., a New York company that tracks mutual fund performance, also showed that, despite gains averaging 6.09%, the equity funds were outperformed by the major stock market indexes. A portfolio of the stocks included in the Dow Jones industrial average, with all dividends reinvested, would have yielded a gain of 7.61%, while the Standard & Poor’s 500-stock index, with dividends reinvested, climbed 8.82%.
A. Michael Lipper, president of Lipper Analytical, said the indexes had been “excessively performing” as a result of takeover activity and added that they were not burdened with administrative expenses.
Gold Funds Weak
Lipper noted that the second quarter was very strong across the board, with individual fund performances bunched closely together. “If we did nothing the rest of the year, we would still come up with an average year,” he observed. The quarter was “almost on the ‘too good’ side.”
Joe Mansueto, president of Morningstar Inc., a Chicago firm that follows mutual funds, was struck by the continued weakness of the international and gold funds: “If you have a bent towards including precious metals for diversity reasons, now might be the time” to invest, he said.
The top-performing funds for the quarter were two Benham funds--the Target 2015 and Target 2010--that focus on long-term Treasury bills, followed by several small growth and capital appreciation funds. William Corneliuson, portfolio manager for Strong Discovery, a $28-million fund that ranked fourth among all funds with a 19.54% gain for the quarter, said a strong position in cellular telephone and environmental service stocks had given the fund a boost.
Fidelity Magellan a Leader
Rapidly rising values in cellular phone stocks, as well as lower interest rates, pushed Utility Funds to the top of the list of industry-specific “sector funds,” with a gain of 11.25%. Natural resources funds, up 3.31%, were the laggards in this category.
Among the nation’s largest mutual funds, Fidelity Magellan was the leader, followed by Investment Co. of America, according to Mansueto, who added that all the large diversified funds had done fairly well.
MUTUAL FUND PERFORMANCE (Appreciation plus reinvested income and capital gains, listed in percent) QUARTER ENDED June 30, 1989
Top Performers Benham Target 2015 +27.42% Benham Target 2010 +23.61 Eagle Growth Shares +23.57 Strong Discovery Fund +19.54 Steadman Oceanographic +19.49 Dreyfus Capital Value +18.57 Alger Small Capital +18.44 Benham Target 2005 +18.27 Vista Funds: Growth and Income +17.75 New England Zenith Cap. Growth +17.48 S&P; 500 (dividends reinvested) +8.82 All funds average +5.83 Worst Performers Strategic Gold/Minerals -9.01% Prudent Speculator: Lge Cap. -8.30 OFA Group: UK Small Company -8.24 Equity Strategies -8.20 American Investors Growth -7.96 First Investors Value Fund -7.92 J. Hancock World: Pacific -7.83 Tyndall-Newport Far East -7.63 Keystone International -7.22 International Cash: Yen Cash -6.91
YEAR ENDED June 30, 1989
Top Performers Eagle Growth Shares +51.92% SFT: Odd Lot Fund +50.97 Fidelity Select Broadcast +45.37 Alger Small Capital +41.76 Vista Funds: Capital Growth +40.55 Benham Target 2015 +40.00 Fidelity Select Restaurant +39.40 Delaware Group: Trend Fund +39.27 Kaufmann Fund +39.22 Idex Fund II +37.97 S&P; 500 (dividends reinvested) +20.48 All funds average +12.43 Worst Performers Strategic Gold/Minerals -25.12% National Precious Metals -17.84 US New Prospector -16.43 SLH Precious Metals & Minerals -16.29 Van Eck Gold/Resources -15.81 Strategic Silver -15.71 Colonial Advanced Str. Gold -15.07 Financial Portfolio: Gold -14.86 Equitec Siebel: Precious Mtl. -13.26 Fidelity Select Electronic -13.21
FIVE YEARS ENDED June 30, 1989
Top Performers New England Zenith Cap. Gro. +513.79% Merrill Pacific A +275.38 Fidelity Select Leisure +251.88 Japan Fund +248.44 Alliance International +239.45 Trustees Commingled Intl. +229.59 Pru-Bache Utility +224.48 Twentieth Century: Gift Trust +218.95 Kleinwort Benson: Intl. Eq. +218.00 Vanguard World: Intl. Growth +216.35 S&P; 500 (dividends reinvested) +149.82 All funds average +102.79 Worst Performers 44 Wall Street Fund -61.62% Strategic Investments -55.06 American Heritage Fund -50.66 Strategic Gold/Minerals -40.20 Steadman Oceanographic -38.08 Dividend/Growth Grow SRS -35.46 US Gold Shares -33.60 Steadman American Industry -24.66 Financial Port: Gold -23.22 Nautilus Fund -12.67
GROUP PERFORMANCE (periods ended June 30, 1989)
Quarter Year Five Years Utility funds +11.25% +18.71% +147.84% Growth funds +7.79 +15.95 +107.45 Capital appreciation funds +7.33 +14.79 +102.49 Science & technology funds +7.07 +7.34 +72.57 Growth & income funds +6.92 +16.06 +120.24 Equity income funs +6.92 +16.26 +114.56 Small company growth funds +6.77 +12.74 +85.65 Balanced funds +6.65 +13.44 +111.80 Income funds +6.14 +13.14 +101.58 Fixed-income funds +5.66 +9.80 +80.46 Health/Biotechnology Funds +5.25 +16.10 +151.03 Convertible securities funds +4.69 +10.22 +89.05 Option income funds +4.23 +12.64 +86.81 Natural resources funds +3.31 +11.41 +82.72 Option growth funds +2.49 +6.62 +94.68 Global funds +1.90 +10.36 +148.68 World income funds +0.45 +2.97 +130.12 International funds -0.27 +11.13 +198.68 Gold-oriented funds -2.97 -7.41 +8.60 S&P; 500 (dividends reinvested) +8.82 +20.48 +149.82 Average all funds +5.83 +12.43 +102.79
Source: Lipper Analytical Services