Want to ‘Play’ the Market? Some Ideas

Investors who have the wherewithal--and guts--to play market trends have two major choices: Bet on what has been hot recently (“momentum� plays) or try to pick the next sectors to move. Both strategies are risky, of course--though potentially lucrative. Here’s a look at some ideas (for specific mutual funds in each sector, see the Morningstar tables on S12-S16):

Momentum Plays: Riding the Current Wave

* Technology: Can anything stop the tech juggernaut, with the average tech fund up 46% through the first nine months of this year? This sector has risen nearly 24% a year in the last decade--and most of that occurred before the Internet became a household word.

* Japan: Despite a huge rally in the last year, the Nikkei-225 stock index still has more than 21,000 points to go just to get back to its peak in 1989. The strong yen is saying Japan’s economic recovery is real. Maybe Pokemon’s success is a harbinger.

* Small growth stocks: Blue chips may still get the most press, but small growth stocks have quietly taken the lead this year. The average small-cap growth fund is up 15% since Jan. 1, three times the gain of the average U.S. stock fund.

* Natural resources: Remember those 1970s-era worries about $200-a-barrel oil? No, we aren’t there quite yet. But oil prices have more than doubled this year, to nearly $25 a barrel. OPEC is sticking to its production cuts--and the average natural-resources stock fund is up 28% year-to-date.

* Gold: Bull-ion market? Gold suddenly rebounded from 20-year lows after European central banks in September vowed to limit future sales. Is a Y2K-induced rally next?

In Search of the Next Wave

* Latin America: This is the laggard region among emerging markets this year, after a third-quarter dive. If Y2K jitters don’t get in the way, could rising commodity prices help put Latin American stocks back on the fast track?

* Value stocks: If investors ever start shopping for stocks the way they do for everything else--looking for bargains--these cheap stocks may stop being so cheap.

* Financials: Down for the quarter, down for the year, stocks of banks and other financial companies have been slammed by rising interest rates and loan-quality worries. But if you think 2000 might bring stable or lower rates--without a sinking economy--these stocks might be money in the bank.

* Real estate: We’re in the second decade of an economic expansion, and interest rates are up. Some investors smell a cyclical real estate slump. Still, stocks in this sector have been lagging for three years. If no slump arrives soon, will bargain hunters step up?

Source: Times staff