CHICAGO -- Gold funds have glowed the past three months, and mutual fund investors who ventured overseas with their dollars won better returns than those who kept their money on American soil, according to a quarterly analysis of stock mutual fund performance released yesterday by Lipper Analytical Services.
General equity funds, most popular among average investors, achieved what Lipper called "normal" gains for the quarter, but they were hardly the kinds of returns to get excited about. On average, second-quarter gains for these general stock funds fell below the advances in the first quarter.
General equity funds gained an average 1.29 percent for the second quarter and 4.58 percent for the first half of the year.
Investors who chose funds specializing in small-company stocks did slightly better than the other types among diversified funds, while growth company and growth and income investors found an average gain of less than 1 percent.
The best returns, as usual, came for investors who dared enter a specialty area, and chose the right one. In this case, as last quarter, it was gold.
Funds specializing in gold stocks soared 29.95 percent in the quarter. In the first half of the year, these funds have gained a spectacular 59.29 percent.
Despite those impressive gains, these funds should be only for the
intrepid, or for those who wish to diversify their general holdings with a sampling of gold, financial advisers say.
Many investors remember only too painfully that this category was last year's loser. And while the top gaining fund for the first half of 1993 -- Lexington Strategic Investments -- has an impressive 198.7 percent gain, it was the worst performing fund of all in 1992, according to Lipper.
"As long as the fundamentals hold the same, we feel gold is in a bull market, not a bear market," said Larry Kantor, managing director of Lexington Management Corp., which runs the Lexington fund, also the quarter's top-ranking fund.
Demand for gold has been solid, he said, and should continue strong. And fears of inflation may drive gold prices even higher -- spelling continued good returns for gold-oriented stocks.
"We always suggest to people that if they are interested in gold, it should be to diversify their holdings, and never more than 5 or 10 percent of their portfolio, Mr. Kantor said. "People shouldn't look at this as a way to make a killing."
Fund managers who bought overseas shares, particularly Japanese shares, were able to boost their funds' performance the last three months. Funds specializing in the long-depressed Japanese market made the best gains in the international sector, with an average 15.01 percent gain.
"International outperformed domestic by a wide margin," observed Lipper Analytical's president, Michael Lipper.
"In this environment, stock picking is as important as it's ever been," said Daniel Miller, whose Putnam New Opportunities fund gained 10.70 percent in the second quarter, to place it at the top of the list of growth funds.
WINNERS AND LOSERS
Here are the 10 best-performing and 10 worst-performing mutual funds and their total returns for the first half of the year:
TOP 10 Lexington Strategic Investments + 198.70%
US: Gold Shares +91.60
Van Eck International Investors +83.05
Fidelity Select Precious Metals +72.66
Bull & Bear Gold Investors +71.0
Blanchard Precious Metals +70.06
Excel Midas Gold Shares +69.79
Thomson: Precious Metals A +65.37
Vanguard Special: Gold +65.19
Keystone Precious Metals +65.0
BOTTOM 10 Financial Portfolio: Health -17.54%
Fidelity Select Medical -16.02
John Hancock Freedom Global RX -13.49
Dean Witter Capital Growth -13.39
Robertson Stephens: Emerging Growth -12.70
Jensen Portfolio -11.52
Fidelity Select Bio Tech -11.30
Dean Witter Health Science -10.97
Pasadena Inv: Growth -10.65
Yacktman Fund -10.44