Picking Stocks? Listen Carefully

WHEN it comes to the stock market, this is a time for careful listening, according to two top officials of the AMEV family of mutual funds, based in Minnesota. AMEV is one of the most successful of the somewhat smaller families of funds, in terms of performance. AMEV is also proof that you don't have to have your investment offices in Manhattan to outperform market averages. The economic environment has shifted dramatically from the bull-market days of the late 1980s, says Stephen Poling, who is executive vice president and chief investment officer of AMEV Advisers, Inc. Mr. Poling sees slow but steady growth in the US economy, yet accompanied by uncertainties about the direction of interest rates, particularly as they are influenced by changing circumstances in Japan and Eastern Europe.

Although Poling anticipates no recession for now, he believes that folks need to be especially selective about their investments; he's following that advice for his own funds.

Poling was interviewed along with Edward M. Mahoney, president of AMEV Advisers. The firm manages some 17 primarily ``low-load'' (i.e., low commission) mutual funds, with total assets of around $900 million. It is a wholly owned subsidiary of AMEV Holdings Inc., New York, which in turn is owned by N.V. Amev, Utrecht, the Netherlands. Mr. Mahoney says AMEV is planning to expand through acquisition of other mutual funds.

Several AMEV funds have been consistent top performers. The AMEV Growth Fund came in as the eighth best stock fund in total return of the 1980s, according to Morningstar Inc.'s Mutual Fund Values, Chicago. The AMEV Capital Fund was listed as the top performing growth and income fund for 1989, according to US News/Kanon Bloch Carr'e & Company. Lipper made it No. 16 in its 10-year performance gauge for the '80s. As for fixed income, Money magazine in February listed AMEV's US Government Securities Fund as one of the top seven federal bond funds over a recent five-year period.

That doesn't mean that AMEV funds will always have clear sailing. The funds dipped during the first quarter of this year, as did the market. But Poling is determined that his funds should regain their advance. He believes one day the market will break loose from its current sluggishness and begin a new bull market.

In the meantime, he says, caution - careful listening - seem appropriate. Poling is building risk aversion into his portfolio - partly by buying defensive issues able to withstand a downturn, partly by making sure that no one issue dominates his holdings. (His small cap fund has 60 issues.) AMEV has few European stocks. Indeed, Mr. Mahoney, for his part, believes that for investors to buy into specialized overseas funds - such as funds geared to a specific European nation - defeats the ``purpose of a mutual fund,'' which is to have broad market exposure.

``We're now in a transitional [economic] period,'' Poling says. Although he doesn't see ``a period of great return'' in the market during 1990, he thinks that the 1990s look promising. One factor spurring long-term growth: the much-talked about yet elusive ``peace dividend,'' which Poling believes will eventually be found as Washington reduces its overall military commitment.

Poling buys stocks based on individual company, as opposed to sector, performance. Still, he likes a number of key sectors: the environment; health care; infrastructure (particularly later in the decade); specialty retailing (such as Wal-Mart Stores Inc., Tiffany & Company, The Limited Inc.); agribusiness; telecommunications (which was a big winner for AMEV in 1989); energy (such as drilling-related companies), and, to a somewhat lesser extent, entertainment (such as The Walt Disney Company).

Poling likes hands-on investing. AMEV has four people weighing investments. ``There are no committees, no long meetings,'' he laughs. The four, including himself, work together and chat throughout the day. ``We're good listeners; we know when a [company] story clicks and when it doesn't.'' A decision to buy a stock is then based on valuation - and the potential for growth.