On and Off the Bandwagon

Blindly following market fads can be a mistake but all long-term trends have to start somewhere, too. Here’s a look at how the wind is blowing on Wall Street:

What’s In

Natural resource fund. Two bucks a gallon for gas? Bring it on. The average natural resource stock fund is up more than 9% year to date. Energy stocks gained even after the news of OPEC’s production hikes last week.

Emerging-market bonds. Who remembers the Russian bond default of 18 months ago? Apparently no one. Emerging-market bonds were the hottest-performing bond sector of the first quarter, up 7.3%, as investors snapped up high-yielding new issues from Latin America, Eastern Europe and elsewhere.

Janus funds. The Denver-based fund company’s aggressive growth-stock strategy produced double-digit returns on most of its funds once again in the first quarter. Its assets are up more than $125 billion during the last year. That’s more than the gross domestic product of Portugal.

Convertible bond funds. Convertible bonds are supposed to give you some of the upside potential of stocks while providing much of the downside protection of bonds. But so far this year convertible funds are up 9% on average more than two percentage points better than the typical domestic stock fund.

Nicholas-Applegate funds. Last year the San Diego-based company’s Global Technology fund led all mutual funds with a 494% return. In the first quarter, the firm’s Global Health fund took the No. 1 spot, up 60.4%.

Vanguard Extended Market Index fund. As blue chips led the bull market in the late 90s, Vanguard 500 Index fund got all the attention. But now, with smaller stocks hot again, this fundwhich tracks the small and medium-size stocks in the Wilshire 4,500 index is finally getting some looks. It rose 9.7% in the quarter.

What’s Out

Real estate funds. Many value stocks rallied late in the first quarter. Real estate investment trusts, meanwhile, rallied for about a week at the start of the quarter, then went into another swoon. Whatever gloom is weighing on this sector, it doesn’t appear to be lifting. The average REIT fund inched up just 1.8% for the quarter.

Junk bonds. Insult of insults: Foreign emerging-market bonds rally in the quarter, while investors bail out of U.S. corporate junk bonds. The average junk bond fund now sports a negative total return for the last 12 months.

Legendary value-fund managers. Despite the comeback for many value stocks late in the quarter, two value legends called it quits: Robert Sanborn of Oakmark Fund and Bill Sams of FPA Paramount Fund. Sanborn’s fund ranks as the absolute-worst large-value fund over the last one and three years. Sams’ fund has lost money over the last one, three and five years, thanks to big bets on gold.

Yacktman funds. Let’s just say it’s lucky for Don Yacktman that he runs his own company. The Yacktman fund and Yacktman Focused fund were down 9% and more than 10%, respectively, in the first quarter. In 1999 they fell 17% and 22%, respectively.

What’s Back In Again ...

Gary Pilgrim of PBHG funds. Last year, it was another momentum manager, Garrett Van Wagoner, who got all the attention. So far this year it’s Gary Pilgrim and PBHG’s turn: Most PBHG funds rose more than 20% in the quarter.

Heiko Thieme. It’s yet another reversal of fortune for this quirky manager, who recently held 75% of his assets in just one stock Senetek. In 1994, ‘95, and ‘96, Thieme’s American Heritage fund was the absolute worst-performer in its category. In 1997, it was the absolute best. In ’98 and ‘99, it reverted to being the absolute worst. But year to date, guess who’s on top again?

What’s Back Out Again . . .

Gold funds. There was a very brief moment late last year when it looked as if gold funds might actually justify their existence. Unfortunately, Y2K fears proved to be a scam and the average precious-metals stock fund lost an additional 15% of its value in the first quarter.

Smaller Asian markets. After rebounding dramatically in 1999 from the region two-year-long economic crisis, the South Korean, Singaporean and Thai stock markets all fell sharply in the first quarter. And they opened the second quarter Monday with more of the same.

Templeton emerging-market funds. Templeton guru Mark Mobius is telling everyone he worries about a global Internet stock crash this year. But his funds performed terribly in the first quarter, apparently without any help from Net stocks.