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The Right Sectors Getting Harder to Find

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Sector funds provide the asterisks of the mutual-fund industry.

Fund families often list them as "specialty funds." And for individual investors, who usually hold at least one large diversified equity fund, they also represent an asterisk. As in * Wow. I made some money there. Or, * Whoops. How did that happen!

Sector funds can put a little kick into your portfolio during a slumping market, when broadly diversified stock founds are running in third gear, experts say.

A sector fund manager focuses entirely on the stocks of a narrow range of companies.

Sectors include such diverse areas as financial markets (banks, brokerage houses, insurance companies); energy (oil, natural gas); utilities (electricity, phone companies, telecommunications); commodities (gold, silver); biotechnology; and health care.

Hit the right sectors - those either posting strong growth or ready to recover ahead of the broader market - and you could dazzle your friends at dinner parties with your financial acumen.

Of the major sectors, only a few have escaped the storms whipping through Wall Street. The powerful financial sector, for example, is off some 6 percent, as measured by the New York Stock Exchange Finance Index; natural resources, down almost 20 percent, as measured by Lipper Analytical Services. Gold is down at least 10 percent, says Lipper.

But the utilities sector is up at least 5 percent, says Lipper; health and biotechnology are up almost 8 percent; science and technology are up just under 10 percent.

"If I had any new money right now, I would [put it] in the large-cap technology sector [firms such as Microsoft and Intel] and the financial sector," says Christopher Burnham, president of Columbus Circle Investors, which manages a number of funds for California-based PIMCo group.

Both areas have taken major hits in the past half year, he says. Yet, Mr. Burnham believes that the market is poised for a rebound, certainly by June 1999.

"Since World War II, the average bear market has lasted 353 days. Since 1987, the average bear market has lasted only 77 days," Burnham says. So historical performance indicates an upturn not too many months off, he says.

A bear market is one in which the broader stock-market averages decline at least 20 percent. Some analysts think we are currently in a bear market that started in August.


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