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Looking for star quality


Star quality. That's what investors seek in the portfolio managers of their stock mutual funds.

Though fund companies don't like to admit it, the manager is all-important. He navigates portfolios through quirky economic and market trends, buying and selling along the way. Unlike those of many other professions, fund managers' performance numbers don't lie.

"While the portfolio manager isn't really as important in a very basic stock index or bond fund, he's vital in any stock fund with distinct goals," observed Don Phillips, publisher of the Morningstar Mutual Funds investment advisory. Here, in Phillips' view, are five of the best portfolio managers:

Albert Nicholas, manager of Milwaukee-based Nicholas Fund since 1969, Nicholas II since 1983 and Nicholas Limited Edition since 1987. Nicholas Fund has averaged a 15.18 percent annual gain over three years. Nicholas II is up 12.35 percent and %J Nicholas Limited Edition is up 15.46 percent. Nicholas doesn't follow trends, he does things differently, such as putting a heavy emphasis on stocks of Midwestern companies that aren't generally followed by Eastern analysts. His funds are good "all-weather" choices, long-term holdings not likely to go out of favor. Portfolio favorites have included International Dairy Queen, Dillard Department Stores, Tootsie Roll Industries, Banta Corp., Fifth Third Bancorp and Dean Foods.

James Gibson, manager of Los Angeles-based Clipper Fund since 1984. It has averaged an 11.54 percent gain over three years. Gibson bets on themes. A contrarian, he constructs a portfolio by evaluating companies just as an individual investor might. Currently not interested in health care stocks, he's betting on media companies, which are generally out of favor. Recent holdings included Telecommunications Inc., Loews Corp., Phillip Morris Cos., Capital Cities/ABC, Federal Express and Pitney Bowes.

Don Yacktman, manager of Chicago-based Selected American Shares since 1983. That fund has averaged a 16.95 percent gain xTC over the past three years. A disciplined investor in big-capitalization stocks, Yacktman limits this growth-and-income portfolio to 30 companies. Price-sensitive, Yacktman buys when there are temporary downward blips in stocks. He's done well this year even though small-company stocks have generally outperformed large-firm stocks. In his portfolio recently were American Express, Federal Home Loan Mortgage Corp., Time Warner, Eli Lilly, Washington Post, Anheuser-Busch Cos., Procter & Gamble and Pfizer Inc.

Roger Engemann, manager of California-based Pasadena Growth Fund and Pasadena Fundamental Value Fund since 1986 and the new Pasadena Nifty Fifty Fund. Pasadena Growth has an average annual three-year gain of 25.04 percent, Pasadena Fundamental Value 19.05 percent. Pasadena Nifty Fifty is up 44 percent this year. Engemann emphasizes long-term growth with superior growth companies. This strategy means that the fund is not for the timid. Engemann isn't afraid of risk, and an investor could get bounced around. The fund did decline 11 percent in 1987. Favorites include Wal-Mart Stores, Nordstrom Inc., Price Co., Home Depot, PepsiCo Inc., Carnival Cruise Line, Mailboxes Etc. and NCNB Corp.

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