Call them mutual fund "perennials:" big-company growth stocks, often tied to technology, communications, and the Internet: Dell, Microsoft, General Electric, Intel, Cisco, Lucent, America Online.
They are the spring flowers of the US stock market - pushing up solid profits for mutual-fund investors. And they shot up like supercharged sunflowers last winter, for the quarter ending March 31.
Internet stocks and the funds that specialize in them were, again, the awesome performers.
The Internet Fund almost doubled in the first quarter alone (see chart, below) and more than quadrupled over the last 12 months.
And while, as the standard disclaimer goes, past performance is no guarantee of future gains, such performance is nothing short of historic.
More of the same
If you missed them, no problem. Barring dramatic alterations, the same sectors and the same stocks are expected to brighten the market through June and possibly the remainder of 1999.
"We see nothing to stop the large-cap dominance," in the months ahead, says Don Ross, chief investment officer for National City Investment Management Company, in Cleveland
By contrast, almost everything else faded like last year's zinnias.
Shares of small companies, and non-technology firms generally turned in a lackluster performance. Arnold Kaufman, editor of a market report published by Standard & Poor's calls the gap "extraordinary."
While the average stock fund in the US gained about 1 percent during the first quarter, index funds linked to the large-cap Standard & Poor's 500 Index rose almost 5 percent. Communications stocks shot up 16 percent; technology funds up 17 percent; large-cap growth stocks up about 9 percent.
And don't overlook the winners from abroad. Asia is staging a comeback.
One of Wall Street's premier investment houses, Morgan Stanley, recently pronounced the end of Japan's 10-year bear market and its current recession.
And Japanese stocks seem to bear out such optimism. They jumped 14 percent in the first quarter.
The Work & Money section covered the potential rebound in Asia last Monday, highlighting markets in South Korea, Thailand, Hong Kong, and Japan.
Optimism about stability in Latin America also brought a boost to market performance there. As a group, the region's stocks rose 11.6 percent.
Meantime, pickings were lean for such out-of-favor sectors as small caps (down 9 percent by one measure) precious metals (off about 4.5 percent), and real estate (down almost 5 percent.)
Ready for a market shift
Despite the divergence, investors should stay calm. The the modest 1 or 2 percent return of most US stock funds should be seen as "remarkable," says Michael Lipper, chairman of Lipper Inc., in New York, a division of Reuters Group PLC.
Such gains follow the huge rise in the market in the fourth quarter of 1998, says Mr. Lipper. Moreover, while new money is not flowing into small-cap and value funds, most money in such funds is staying put, he says.
That leaves many mid-cap, small-cap, and value funds well positioned if the market shifts in their direction, he says.
Diversification, says Lipper, is as important now as ever. The bias to "big" could change at any moment, he says.
"It is very important to be ready" for gains from out-of-fashion investment sectors, says Russ Kinnel, associate editor of information-firm Morningstar Inc., in Chicago.
"Something like that occurred with the market in general late last year," Mr. Kinnel says. "If you were out of the market in November and December, you missed out on a sizable rally" in large-company stocks.
One way of ensuring that you're prepared for a shift is to be in a "Total market index fund," says Sheldon Jacobs, editor of the No Load Fund Investor, a newsletter published in Irvington-On-Hudson, N.Y. Most major fund groups offer total-market funds.
Although such funds are typically linked to the Wilshire 5000 index - which covers most publicly traded US companies - it is important to remember that about 80 percent of the gains from total-market funds come from large-cap companies listed in the S&P 500 Index, says Jacobs.
So you have a two-fold advantage: gains from the big stocks plus exposure to small-cap and value companies.
If the first quarter seemed less than perfect for equity investors, bondholders had even more to complain about.
Low-yield bond performance
Long-term US treasury funds showed an average loss near 1.6 percent, according to preliminary figures from Lipper.
Long-term corporate funds also fell, with the average fund losing about 0.7 percent.
But two bond categories did quite well: emerging-market bond funds gained an average of 4 percent for the first quarter, and high-yield, junk bonds funds rose about 2.8 percent. Both categories are expected to do well again in the second quarter.
The main impediments to gains in high-yield funds - the threat of a recession and a sharp increase in interest rates - are clearly absent right now, says Alison Granger, portfolio manager of the Hartford High Yield Fund, in Hartford, Conn.
She believes that equity investors should now be shifting some assets into high-yield bond funds. High-yield sectors that are currently attractive include telecommunications and cable TV, she says.
Top-performing funds Top-performing funds
FIRST QUARTER 1999 TOTAL RETURN PHONE NUMBER Nich-App: Glbl Tech I 96.6% 800-551-8043 Internet Fund 93.1 888-369-3999 Monument Internet Fund 91.9 888-420-9950 Amerindo Technology D 66.7 888-832-4386 Nevis Fund 58.9 877-446-3847 Van Wagoner Technology 58.7 800-228-2121 Van Wagoner Emerg. Growth 55.8 800-228-2121 Van Wagoner Post-Venture 55.3 800-228-2121 Munder Netnet B 53.8 800-438-5789 Warburg Pincus Intl. Small co. 49.3 800-927-2874
ONE YEAR TOTAL RETURN PHONE NUMBER Internet Fund 343.2% 888-369-3999 Amerindo Technology D 164.5 888-832-4386 Munder Netnet A 141.1 800-438-5789 Profunds Ultra OTC; Inv 136.4 888-776-3637 Grand Prix Fund 128.3 800-432-4741 Berkshire Cap Growth & Value 123.9 877-526-0707 Van Wagoner: Technology 115.0 800-228-2121 WWW Internet Fund 96.8 888-263-2204 Dreyfus Technology Growth 96.1 800-373-9387 Fidelity Select Computer 91.4 800-544-8888
FIVE YEAR (ANNUALIZED) TOTAL RETURN PHONE NUMBER Rydex OTC Fund Inv 40.2% 800-820-0888 Fidelity Select Computer 37.3 800-544-8888 Legg Mason Value 37.2 800-822-5544 Janus Twenty 36.1 800-525-8983 Fidelity Select Electronic 35.9 800-544-8888 Alger Retirement Cap Apprec 35.2 800-992-3863 Flag Inv. Communications A 34.9 800-767-3524 Alger Capital Apprec. B 34.0 800-992-3863 White Oak Growth Stock 33.6 888-462-5386 Fidelity Select Health 32.9 800-544-8888
Source: Lipper Inc. WHITNEY DODDS WOODRUFF