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Date: Mon, 16 Nov 92 12:56:07 EST
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11/16/92


Making Money In The Mutual Many Growth Funds Snap Back On Rally

Shearson's Freeman Sees Tax-Loss Moves Playing A Role Doug Rogers
New investors in growth funds are finding out just how volatile
they can be.  Many funds are up as much as 16% in the past four
weeks, helped by a strong rally in smaller-cap growth stocks,
such as those represented in the Nasdaq composite index. The in-
dicator is up about 12% since its most recent low on Oct. 5 and
about 9% in the past four weeks.  Much of the move came after
Bill Clinton's victory in the presidential election.  Among
groups making strong comebacks are health care - including
biotechnology - and technology.  The rally has helped many growth
funds regain lost ground. After posting big gains last year, many
top funds have been carrying double-digit declines for a good
part of the year.

As the accompanying chart of A+ and A rated funds shows, 21 funds
are now even with or higher than where they were at the beginning
of the year. On Oct. 15, all but two were in negative territory.
Fund managers point to the oversold positions of many stocks.
Some of the stocks that Richard Freeman, manager of Shearson Ag-
gressive Growth Fund, found appealing were selling at prices near
their cash levels, he says.

Freeman, who has $210 million under management in Aggressive
Growth, also noted that tax laws may have something to do with
the rally. He thinks the so-called "January effect," in which
depressed stocks tend to rally at the beginning of the year, has
been occurring earlier because many mutual funds take their capi-
tal gains and losses by Oct. 31.

"Through October, most every aggressive growth fund or small-cap
fund was essentially down for the year," he said. "And let's say
you book a capital gain (from selling long-held positions). I
don't think that many shareholders would feel happy if they had
to pay a big capital-gain tax while they actually lost princi-
pal." So a lot of managers try to get their capital gain down as
much as they can by taking a lot of losses.  "That's what caused
the final washout in September and October for some of these com-
panies that were down pretty sharply already," Freeman said.  A
lot of secondary biotech companies that might have come public at
$15 a share were trading in big blocks of 5 and 6, he said.  "So
what happened in November -leaving the election aside -
 is the absence of the tax-loss pressure caused a lift in the
market," Freeman contended. "You haven't had any really particu-
lar company news, although psychology is a bit better." Opportun-
ities to pick up stocks at such cheap prices come only about once
a year, Freeman says.  "But the reflex part of the rally might
have spent itself," he said. "From this point on, I think you
will need news events to propel them further."

Freeman thinks biotechs still have the best growth prospects for
the next three to five years - despite Clinton's campaign prom-
ises to get health-care costs under control.  "Here's a man who
has been saying he'll highlight investment in the country, tech-
nology and keeping America in the forefront," he said.  Amgen
Inc. is one of the most rapidly growing employers in California,
Freeman figures, and he can't see how Clinton could take steps to
slow the industry's growth.  Besides Amgen, Aggressive Growth's
top biotech holdings include Chiron Corp.- , Genentech Inc. and
Genzyme Corp. Freeman also has HMOs and other managed-care
stocks.

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