With a 127% increase, top gold funds shone last year

It was the year of the gold funds. Those mutual funds that invested in gold stocks or gold bullion itself were the shining lights of the mutual fund industry last year.

According to the Wiesenberger Investment Companies Service, the top five gold funds -- which were also the five best-performing mutual funds -- rose 127.5 percent as of Dec. 31. This gain, Wiesenberger noted, was "substantially above the average for the 486 funds covered" and "overshadowed a slight upward movement in the general market and even a very strong surge in the value of the metal itself."

Even though the price of gold has soared, Roy Brenna, president of Strategic Investments Fund, the top gold fund, says he thinks the future of the metal remains bright. "I expect gold to go to $1,000 an ounce in 1980," he stated. Mr. Brenna is not certain whether he would keep his fund invested in gold stocks at that point, however. It is possible, he says, that there will be enough "monetary turmoil" to prompt frightened investors to sink more money into gold. Or the government might massively restimulate the economy, temporarily reviving business confidence, until another round of inflation emerges. For the time being, he's not moving his $12 million out of South African mining shares. "Oil prices and interest rates will be the critical factors," he concludes.

Behind the Dallas-based Strategic Investment Funds, up 171 percent at the end of 1979, were New York-based International Investors, up 162 percent; United Services Fund of texas, up 160 percent; the San Francisco- based Research Capital Fund, up 128 percent; and the New York-based Golconda Investors, up 116 percent. Golconda was up less than the other gold funds because it invests a portion of its assets in gold bullion itself, which has not risen as much as the gold stocks.

A second tier of maximum-capital-gains funds performed well, but trailed the gold funds. The top performers of these funds in 1979 were Able Associates, up 79.1 percent; Constellation Growth Fund, up 76.8 percent; Twentieth Century Growth Investors, climbing 74.2 percent; 44 Wall Street Fund, up 73.6 percent; American Investors, 62 percent; and American General Growth Fund, 60 percent.

The ranking of these funds sometimes shifts around from month to month, an indication of the volatility of their investments. For instance, the 44 Wall Street Fund was the top performer at the end of November but down to fourth at the end of December.

According to David Baker, president of the 44 Wall Street Fund, the basic investment philosophy of the fund has been to invest in emerging growth stocks, "concentrating heavily on those which are most attractive on a relative-value basis." Mr. Baker says he looks at the economy to see how it will develop in the year ahead. "Then, we try to find companies selling at reasonable price-to-earnings multiples in those parts of the economy that will do well."

Currently, the fund is invested in high- technology stocks, hospital management companies, service-oriented companies, and oil stocks.

Not surprisingly, the oil stocks have been the best performers for the fund. Among the winners were American Quasar, moving from $14 a share to $26, and McMoran Exploration, which has risen from $11 to $53.

For the year, the growth funds did not perform badly. The 90 maximum-capital-gains funds tracked by Wiesenberger rose by 35.9 percent on average in 1979. And even funds that invested in "long-term growth" showed an increase of 26.5 percent. Growth and income funds rose 21.3 percent, while income funds rose 14.7 percent. These statistics take account of capital gains, income, and reinvestment. The comparable figures for the Dow Jones industrial average were 4.2 percent, while the Standard & Poor's 500 gained 12.3 percent. On average, 484 funds examined by Wiesenberger showed a gain of 21.1 percent in 1979.