Now what happens?

Kiplinger's Personal Finance Magazine, August, 1998 by Manuel Schiffres

But the fund's recent record has been attracting investors, and Grender is having trouble finding attractive stocks to buy with the new money. "I'm not suggesting I'm any good at making market calls," he says, "but it's impossible for the market to continue to compound at 25% when the economy is growing at 3%. If I inherited $100 today, I wouldn't want to put it all in stocks--even though long term I'm a believer in stocks."

Perhaps no top manager is more cautious than Robert Rodriguez, who has run FPA Capital (number three in the aggressive-growth group over the past five years) since 1984. Rodriguez, a contrarian who buys beaten-down stocks, recently held fewer than 70% of his $820-million fund's assets in stocks because so few meet his rigid value standards.

Rodriguez thinks stock prices are not likely to remain at their current high levels because investors are too optimistic about corporate profits. Still, he insists, he is neither timing nor forecasting the market. "All I'm saying is, I don't like the odds," he says. (FPA Capital is closed to new investors.)

THEY'RE STILL BELIEVERS

THE TOP AGGRESSIVE-GROWTH FUND OF THE past 12 months, Delaware-Voyageur Aggressive Growth, earned its laurels by frenetically buying and selling rapidly growing companies. Manager Gerald Frey, who typically invests in companies of any size whose earnings are growing at a 20%-a-year or higher pace, says "a good market, some good stock selection and absolutely no mistakes"--a combination of circumstances that he acknowledges is unlikely to be repeated--fueled the $75-million fund. Frey looks for stocks, particularly those of small and midsize companies, to produce decent returns in the second half of 1998.

But for sheer optimism, it's tough to top Jim Oelschlager, who runs White Oak Growth, a top performer among long-term-growth funds over the past three and five years. Oelschlager, whose $689-million fund holds just 24 mostly large issues--almost all in technology, financial services and pharmaceuticals--sees stocks continuing to benefit from declining inflation caused by the high-tech revolution. "What's happening in technology is going to result in the equivalent of the industrial revolution of the 1800s," says Oelschlager. "If you have a three- or four-year time frame, the market will do pretty well from here."

EUROPEAN REVOLUTION

ACROSS THE ATLANTIC, EUROPEAN BOURSES WENT bonkers. Over the past 12 months, Italy's stock market returned 82% in U.S. dollars, Portugal's, 132%, and France's, 61%, Carol Franklin, whose Scudder Greater Europe Growth was the top-performing specialized international fund over the past year and sixth-best of all funds, says various factors have contributed to Europe's strength. An economic expansion is gathering steam, and lower inflation should result from the decision by 11 European nations to move to a single currency and the self-imposed fiscal restraints those nations have adopted. A "changing value system of European corporations" means that they are focusing more on improving returns shareholders. And European stocks are by and large still cheaper than those of U.S. companies.