Mutual funds, which sagged badly in the opening months of 1990, bounced back in the second quarter, with the strongest gains coming from funds that invest in the stocks of health and technology companies.
A group of nine health and biotechnology funds soared an average of 17.1 percent, while 23 science and technology funds rose an average of 11.1 percent during April, May and June.
Overall, the 750 general stock funds, which invest in a broad collection of equities, turned in an average gain of 5.9 percent. It was a vast improvement over the 2.3 percent loss that the funds suffered in the first quarter when the stock market still was trying to recover from the mini-crash of Oct. 13, 1989.
Even though the performance of the general equity funds turned around, however, they were unable to match the gains shown by the major market averages. The Dow Jones industrials gained 7.4 percent while the Standard & Poor's 500 rose 6.3 percent during the second quarter. All of the figures include reinvested dividends.
Prominent on the rebound list were the 17 Pacific region funds that invest in Japanese and other Asian stocks. They had fallen a dramatic 13.1 percent in the first quarter when the Tokyo stock market made its long-predicted plunge. They climbed back 9.3 percent in the second quarter as stock prices in Tokyo improved.
Gold funds, which tend to be either big winners or big losers, were heavy losers in the second quarter, with the 35 funds dropping an average of 10.3 percent. That came on top of a 6.9 percent loss earlier this year. Investors flock to gold funds in times of economic stress and leave them when those fears subside, making the funds highly volatile.
Fixed-income investors also fared better in the second quarter than they did in the first. A group of 534 fixed-income funds that invest in bonds and similar securities fell an average of 2.3 percent during the early part of the year but gained 3.2 percent in the spring quarter.
Michael Lipper, a veteran mutual fund observer who tracks the performance of 1,771 equity and fixed-income funds, noted that strong second-quarter showings were turned in by funds that invest in growth companies -- generally defined as companies where profits grow faster than the average.
Lipper noted that "growth is back in style" and reported that 263 funds that invest in growth companies rose 7 percent in the second quarter. Similarly, 83 funds that invest in smaller growth companies climbed an average of 7.5 percent.
The 25 mutual funds that put on the best individual performances during the second quarter represented a diverse collection of investment themes, including computer technology, telecommunications, health services, environmental cleanup, biotechnology and Pacific basin companies.
On the losing side, 23 of the 25 laggards were gold funds.
The diversity of the winners reflected the choppy, often trendless market conditions that have been in evidence this year, portfolio managers said. Without a broad-based rising tide to boost all stocks, they said, individual stock selection had assumed new importance.
"Stock selection is important," said Larry Greenberg, manager of Fidelity's Select Medical Delivery Fund, which gained 20.8 percent in the second quarter, making it the fourth-biggest gainer.
"The whole theme of this market is that people don't want any earnings disappointments," he said.
And even though the health service business is strong, Greenberg said, it is not sufficient for a portfolio manager simply to choose companies from that field. The companies must be able to successfully implement their corporate strategies.
"We see some winners and we see some losers," Greenberg said.
On the list of individual winners, the best performing fund was the Schield Progressive Environmental fund, which gained 29.5 percent.
Glenn Cutler, the fund's manager, said that the stocks selected for his fund had to pass two levels of inspection. First, they had to be stocks of companies that are involved in environmental work and, second, the companies had to be considered "socially responsible."
Only about five months old, the fund has $1.6 million invested in 14 stocks. The company's largest position is in Sanifill Inc., which operates landfills in Georgia and Texas. The fund has 16 percent of its money in Sanifill.
Third on the winner's list was Bull & Bear Special Equities, directed by Brett Sneed, who has seen the assets of his fund rise from $8 million in March to $34 million today.
Sneed, whose fund gained 22.4 percent in the quarter, said he had bought the shares in several small health care companies, including Occupational Urgent Care Health Systems Inc.
"They have worked out very well," said Sneed. Many of his recent investments, Sneed said, also were in technology companies, such as Bloc Development Technologies Inc., a software house.
On the international front, Haruo Sawada, senior vice president of Nomura Pacific Basin fund, said his second-quarter gain of 17.7 percent represented a major rebound from a 20.2 percent loss in the first quarter.
Despite the plunge in the Tokyo stock market, Sawada said, his firm did not flee from Japanese stocks, as did many other Pacific funds.
Instead, he said, Normura decided to stick to its basic strategy of investing in a wide variety of Japanese stocks that are selected after intensive research by Nomura's 200 stock analysts.
Investors in stocks of companies headquartered in the Washington-Baltimore-Richmond region got mixed results from the three funds that specialize in local equities.
To the extent that the funds were invested in bank, thrift, real estate or retail stocks, the funds' performance would have been hurt.
The best performance came from the Southeastern Growth Fund, owned by Wheat, First Securities of Richmond, which gained 6 percent for the second quarter after a 3.6 percent loss in the first quarter. For the first six months, the gain was 2.2 percent.
At the Growth Fund of Washington, run by Johnston, Lemon & Co., of Washington, the gain for the second half was 0.6 percent after a 4.6 percent drop in the first quarter. For the six months, the loss was 4.1 percent.
The poorest performance came from the Washington Area Growth Fund, operated by the Calvert Group of Washington, which dropped 4.7 percent in the second quarter after a 2.3 percent loss in the first quarter. For the first half of the year, the fund was down 6.9 percent.