FUNDamentals

Independent commentary on individual mutual funds

Mairs & Power Growth

Type: Growth

Size: $191 million

Phone: (800) 304-7404

Sales charge: none

Morningstar rating: HHHHH

Total return: YTD: +8.7% 1996: +27.8% 1995: +47.7%

By sticking to its core, Mairs & Power Growth has become an excellent core offering. Manager George Mairs is a demanding homebody. He looks for companies that have strong returns on equity, sound balance sheets and dominant market positions. Moreover, Mairs likes to be very familiar with the firms he buys and to keep a close eye on them. As a result, 25 of the fund’s 33 current holdings are based in Minnesota [Mairs’ base]. Finally, Mairs sticks with the issues he buys; the fund’s turnover could hardly be lower. Though it is compact and geographically focused, the fund provides exactly what a core offering should: long-term gains and diversification. The fund’s long-term returns are among the best around, in fact. Thanks to its low turnover, the fund looks really good on an after-tax basis. Finally, the fund charges no load or 12b-1 fee; its expenses are well below average, and its investment minimums are moderate.

--Bill Rocco for Morningstar, May 9

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Nicholas Income

Type: High-yield bond

Size: $199 million

Phone: (800) 227-5987

Sales charge: none

Morningstar rating: HHHHH

Total return: YTD: +3.8% 1996: +12.4% 1995: +16.2%

Nicholas Income is well-prepared for trouble, regardless of where it comes from. This fund has one of the best credit profiles in the high-yield category. Manager Albert Nicholas limits the fund’s investments to bonds rated B or higher and keeps more than a third of assets in issues rated BB, the highest tier of the junk bond market. In his search for attractive valuations, Nicholas often focuses on out-of-favor credits, but he avoids the most erratic areas of the market, such as gaming and cyclical credits. The fund’s solid risk profile has limited its total returns, however. The fund placed at or near the bottom of its category as interest rates fell from 1991 to 1993, and its annual income returns routinely fall in the group’s bottom half. Junk bond bulls will probably be unsatisfied with the fund, but its reliable performance and low expenses make it worth considering for many accounts.

--Carolyn Whitfield for Morningstar, May 9

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Star ratings are risk-adjusted performance ratings on a scale of 1 to 5 (5 being the highest), based on at least three years of fund data, with greater weight given to five- or 10-year data if a fund has existed for that long. Funds less than 3 years old aren’t rated.

These evaluations are excerpted from Morningstar Mutual Funds. More information about these or other funds can be purchased directly from Morningstar in print or software form. To inquire, call (800) 735-0700. To submit a fund for possible review in this column, write FUNDamentals, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053. Fax: (213) 237-7837. E-mail: business@latimes.com