For the managers of the Phoenix-Engemann Value 25 Fund, spring was payback time.

After trailing the hot Standard & Poor's 500-stock index by more than 20 points last year, the Phoenix-Engemann Value rocketed back to become the top-performing equity income mutual fund in the second quarter.

The fund not only gave its investors a 19.26 percent return for the three months ended June 30, it also topped those pesky S&P index funds by more than 10 percentage points.

The Value 25's name describes it, said Lou Holtz, one of a team of managers at Roger Engemann & Associates in Pasadena, Calif., who oversee the fund. "It generally invests in 25 high-yielding stocks from the S&P 500 index" focusing on "sound companies that are relatively inexpensive," Holtz said.

"Generally, the stocks that have been relatively inexpensive have been those in the basic-materials, capital-goods and consumer-cyclical areas. Most of our holdings are in those industries," Holtz said.

Thus, when the market rediscovered basic industries this spring, the fund was already there.

Some of its top winners were Fluor Corp., which gave the fund a 51 percent return; Brunswick Corp., which rose 47 percent; and Whirlpool Corp., which climbed 37 percent, Holtz said.

Consolidation in basic industries also helps, Holtz added, noting that the fund had a stake in Aeroquip-Vickers Inc., a manufacturing and engineering company that was taken over early this year "and we did very well by it."

The fund rebalances its portfolio every quarter, searching for any new undervalued stocks it can find and sometimes selling off its winners.

Holtz said the fund has just completed that process for the end of the second quarter and has taken its Fluor, Brunswick and Whirlpool gains while adding holdings in General Motors Corp., Alleghany Teledyne Inc., a diversified manufacturing company, and Harris Corp., which makes electronic products and office automation equipment.

Holtz said the firm believes that this strategy of searching out undervalued stocks--the classic value investing strategy--does indeed live up to the reputation it earned years ago as benefiting the long-term investor.

"What we've found is that undervalued stocks like the ones in the fund tend to do well over time, though they might not be in favor for some period of time," Holtz said.

"We don't know when the shift will occur, but when it occurs it usually occurs very strongly. We invest in those stocks so when the market does come back to them we will benefit," he said.

"Over time, this type of strategy outperforms the market."

The fund was known as the Pasadena Value 25 Fund before Engemann sold his firm to the Phoenix Funds.

CAPTION: Lou Holtz oversees fund, which invests in "sound companies that are relatively inexpensive."