3 banks that might be targeted, and advice about mutual funds


IF YOU are buying bank stocks or mutual funds, here are some things to consider:

"Bank mergers will continue through year-end," says bank stock analyst Reid Nagle. He adds that "small and medium-size banks will emerge again as hot takeover targets." Nagle advises regional banks with mid-teen P/E ratios. His favorite takeover targets: Mercantile Bancorp, Riggs National Corp. and UnionBanCal Corp.

"Investors can build diversified portfolios with four mutual funds," says Catherine Voss Sanders, publisher, Morningstar Fund Investor. "More than four creates an overlap which diminishes your returns. Best strategy: divide assets among large-cap growth, large-cap value, small-cap growth and small-cap value funds. Look for expenses under 1.25 percent per year, experienced management and consistent performance in up and down markets."

The Kiplinger Personal Finance Adviser says: "For each mutual fund you get semiannual and annual reports, fund newsletters, boasts and apologies from managers and often indecipherable 1099 tax forms. A midyear portfolio cleaning reduces the paper blizzard and improves your performance. Group funds by type, get rid of losers that don't perform best for three- and five-year performance."

Professional Tape Reader has this cautionary note: "While the Dow showed big recent gains -- and the OTC composite and Russell 2,000 were off -- this smacks of 'Nifty-Fifty' 1972-'73 buying when stocks were also in the ninth inning of their bull advance. This is a major cause for concern."

Pub Date: 6/05/98

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