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Fundamentals

Independent commentary on individual mutual funds

September 09, 1997

MainStay Value B

Type: Value stocks Size: $1.3 billion Phone: (800) 624-6782

Max. sales charge: 5% Morningstar rating: ****

Total return: YTD: +18% 1996: +21.1% 1995: +28%

MainStay Value's skinflint style isn't always fashionable, but it looks pretty good over the long term. Denis LaPlaige and Jeff Simon do a lot of the same things as other value managers, but they do them to extremes. Oftentimes they pick up stocks when other investors are stampeding for the exits. The fund boasts price-to-book, price-to-cash-flow and price-to-earnings ratios that are among the conservative large-cap value category's lowest. This approach works better in some environments than in others. The fund's bet on utilities hasn't paid off so far in 1997, and some lagging individual picks, ranging from Columbia/HCA to Wells Fargo, have also held back the fund this year. Still, its trailing 10-year return places it within the category's top half. Though the fund's total costs remain above average, given its decent long-term record it may be worth the money.

--Scott Cooley for Morningstar, Aug. 15

*

Westwood Balanced

Type: Stock and bond Size: $60 million Phone: (800) 937-8966

Sales charge: None Morningstar rating: *****

Total return: YTD: +18.4% 1996: +18.1% 1995: +31.2%

Westwood Balanced Fund goes a lot farther than its peers by knowing when to pull back and when to race ahead. The fund's lead manager, Susan Byrne, has built a fantastic record by buying value stocks that eventually become growth stocks. The fund's trailing three- and five-year returns both land in its category's top decile. The key to these strong results has been Byrne's over-weighting of stocks and sectors where expectations are low. Byrne added to Dell Computer after it tanked in March, in time to enjoy that stock's 73% explosion in the second quarter. But owning such high-flying stocks hasn't meant high risk, thanks to Byrne's rigorous self-discipline. Because she keeps the equity portfolio equally weighted, she regularly takes profits on appreciating stocks. The fund's volatility has been further tamed by its 40% stake in bonds. This fund doesn't sacrifice risk or return, making it one of the category's best offerings.

--Kevin McDevitt for Morningstar, Aug. 1

*

Brinson Global

Type: Global multi-asset Size: $609 million Phone: (800) 448-2430

Sales charge: None Morningstar rating: *****

Total return: YTD: +10.5% 1996: +14.1% 1995: +24.1%

Brinson Global is all the wiser for knowing its limits. Within the fund's roughly 40% equity stake, manager Gary Brinson and his team stick to mid- and large-cap stocks from the world's developed markets; on the bond side, they invest in corporate and sovereign debt from the United States and abroad. The fund treads lightly in emerging markets. Brinson says emerging-markets investing is such a labor-intensive process that his team's time is better spent analyzing the world's developed markets--and getting the outlook right. The fund's record reveals that its combination of top-down analysis and bottom-up security selection has been on target. At the moment, Brinson is concerned about overly optimistic investor expectations, particularly in the United States. The U.S. equity stake is therefore nearly half that of the fund's benchmark weighting. Given the fund's fine returns, this prudence is sure to serve investors well.

--Tricia Oehme Rothschild for Morningstar, Aug. 1

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