Small Perkins Fund Best For Appreciation

Should an investor buy shares in a tiny mutual fund that has been around barely more than two years?

Well, maybe, if it’s the Perkins Opportunity Fund (800-366-8361). Since its inception in February 1993, its performance has been spectacular. It has appreciated at an average annual rate of 35.8 percent - No. 1 among 109 capital appreciation funds tracked by Lipper Analytical Services.

Over the last 12 months, the fund has risen 29.7 percent, also tops among capital appreciation funds. This year, through March 23, Perkins is up 20.7 percent. That makes it the No. 1 capital appreciation fund for 1995, too.

Dan Perkins, co-manager of the $11 million-asset suburban Minneapolis-based fund, pursues a rare - perhaps unique - investment strategy. He favors small companies, many of them in the upper Midwest, undergoing some sort of beneficial change, whether it be the introduction of a product line or the addition of a key manager. As a technical analyst, Perkins’ stock picks have also created a “base” in their daily price pattern, which essentially means they tend to be closer to their bottom than their top.

Perkins successfully weathered wretched market conditions in 1994 and limits his investments to stocks he knows intimately. That’s why so many of his 50 holdings are based in his backyard.

Another plus is Perkin’s propensity for small stocks, such as Canadian-based Plaintree Systems, a maker of computer networking switches, and Minneapolis-based Education Alternatives, a private manager of public school districts. Over time, small stocks, as measured by the Russell 2,000, outpace big stocks, and they have been in a favorable cycle since 1991.

This fund isn’t for everyone. Small stock funds are almost always volatile, and so investors with queasy stomachs should look elsewhere. Perkins Opportunity carries a hefty sales commission - 4.75 percent - and has a steep 2.5 percent annual expense ratio. It also can borrow heavily to buy shares, a risky proposition, and boasts a high turnover rate of 100 percent a year.