Every year, only 20 of the nearly 1,000 common-stock mutual funds make the vaunted Forbes Mutual Fund Honor Roll. That's because the criteria are so rigorously exclusionary.
To make the grade, a fund must have made lots of money for its investors and have sidestepped all risk in the process. All 20 of 1989's Honor Roll funds turned $10,000 in 1980 into at least $26,000 today. And all survived the three bear markets during that period.To hardly anyone's surprise, Fidelity Magellan Fund again topped the Honor Roll standings, the fifth year in a row it's earned this distinction. Magellan earned a 23.9 percent average annual return over the 81/2-year rating period. Ten thousand dollars invested in it would be worth $47,871 today.
A newcomer to this year's Honor Roll, the St. Louis-based Lindner Fund, jumped into second place in long-term performance with a 20.1 percent average annual return. Ten thousand dollars invested in Lindner 81/2 years ago would be worth $36,840 today.
Each of the top 10 Honor Roll funds, as it turns out, would have turned that mythical $10,000 original stake into more than $30,000 by now. The other big winners, in order of what they would have made on their 10 grand: Bergstrom Capital ($35,188), Lehman Opportunity ($33,489), Nicholas Fund ($32,632), United Income ($31,974), Fidelity Destiny Portfolio ($31,286), Selected American Shares ($30,721), Guardian Park Avenue Fund ($30,616), New England Growth Fund ($30,431).
Fidelity Magellan Fund also shares the record for making the Honor Roll the most consecutive times (eight) with the Milwaukee-based Nicholas Fund. Besides Magellan and Nicholas, only five of the remaining 18 top funds have made back-to-back appearances on the Roll. Here they are, along with the number of consecutive years they've been honored: Fidelity Destiny Portfolio (seven), Bergstrom Capital (six), New England Growth (five), SLH Appreciation Fund (four) and Guardian Park Avenue Fund (two).
(BU) The long-term consequences of the October 1987 stock market crash have been underestimated, and the country's financial systems face greater dangers unless reforms are adopted, says "Crash: 10 Days in October . . . Will It Strike Again?" by Professor Avner Arbel of Cornell and Albert Kaff (Longman, Chicago).
According to the authors, the entire Western financial system approached meltdown in 1987 for five reasons: (1) Specialists failed to maintain orderly markets. (2) The trading information system collapsed. (3) Risk control safeguards didn't work. (4) There was no synchronization between stock, futures and options markets. (5) U.S. and foreign markets had disastrous effects on each other.
The authors contend that the current speculative wave of leveraged buyouts and junk bond financing may prove more dangerous than the speculative bubble preceding the 1987 crisis and that even revised trading rules are unable to cope with today's volatile markets, which involve highly complicated and risky financial products and interlinked trading.
"Our research shows that unless corrective measures are taken, the financial system as a whole, and not only the stock market, may collapse even if the economy performs reasonably well."
Investor's Notebook reflects the opinions of professionals. It does not endorse specific investments, and no endorsement is implied or should be inferred. For more information, contact the individual firms cited. (C) 1989 Universal Press Syndicate 4900 Main St., Kansas City, MO 64112