Just 21 Funds Outperform S&P; Index Consistently

Of the thousands of mutual funds on the market today, only 21 have outperformed the Standard & Poor 500 over one-, three-, five- and 10-year periods, according to figures compiled by Lipper Analytical Services.

Among the consistent winners are five in the Fidelity group, two offered by MFS and one Safeco Equity - based in Seattle.

Among the elements common to all the funds are heavy reliance on research, long-term focus and strategies geared to avoiding substantial losses in a market downturn.

The financial sector was the strongest, helped by the wave of mergers that has reduced the number of institutions from 14,000 to 10,000 over 10 years. Jim Schmidt, portfolio manager for John Hancock Regional Bank predicts another 2,000 will disappear by the year 2000.

The Hancock fund returned 27.7 percent after tax in 1996, and 22.3 percent, 27.4 percent and 18.4 percent for the three-, five-, and 10-year periods Lipper analyzed.

Fund manager foresees Dow 8000

Pessimism now oppresses many money managers, but Terry Milberger, who oversees the $700 million Security Equity Fund, stands with the bulls.

“I don’t think an 8,000 Dow is unreasonable this year,” Milberger told the Bloomberg Portfolio Spotlight, as the Dow Jones Industrial Average hovered around 6970. “As long as the landscape doesn’t change, with low inflation and a moderately growing economy, the money will continue to go into stocks and they should continue going up.”

Milberger, 48, has been managing his fund since 1981. In the past five years, it has returned 115.62 percent, seven percent shy of the 122.83 percent the Standard & Poor’s 500 returned in the same period. Security Equity ranks 41st out of 247 growth funds tracked by Bloomberg Fund Performance.

Milberger said he buys a combination of fast-growing “growth” stocks and “value” stocks - shares of companies he believes are inexpensive.

Recently, he said he’s been buying oil exploration shares, such as Noble Affiliates Inc., which has declined 16.19 percent this year, and Union Pacific Resources Group Inc., which is down 11.64 percent.

The fund holds about 100 stocks. As of Sept. 30, 1996, the largest holdings were AlliedSignal Inc., American Home Products Inc., and US Industries Inc.

, DataTimes