Sifting Through a Tangle of Mutual Funds.

It's popular to decry the surfeit of mutual funds. Defining your terms right, there are more funds than there are stocks to invest in - a near absurdity.

This situation may prove unpleasant or even disastrous for fund companies. But I see little harm to individual investors, who have many ways to sort through the multitude.

To sort them myself, I used Bloomberg fund-screening software to identify U.S. mutual funds that met four criteria:

Up an average 20 percent a year or more in the past five years.

Up an average 15 percent or more in the past year.

Up an average 15 percent or more in the past three years.

A minimum investment of $10,000 or less.

Among thousands of funds, only six made the grade. Consistent performance has been tough because the market has changed so much in the past few years. Until 1999, growth stocks, especially technology and biotechnology, were all the rage. In 2000 and early 2001, value stocks were the leaders.

Here are the funds that met the criteria, listed in order of five-year total return: Wasatch MicroCap Fund, up an average of 32.6 percent a year, Olstein Financial Alert Fund, up 26.6 percent; Wasatch Core Growth Fund, up 25.3 percent; Pimco Renaissance Fund, up 23 percent; Dreyfus Midcap Value Fund, up 22.8 percent; and Royce Low-Priced Stock Fund, up 20 percent.

Small fund's coup

I consider the results a coup for Wasatch Advisors Inc., a relatively small fund family. It charges no load, or up-front sales fee. However, it may charge a management fee of up to 2 percent a year, which is unusually high. It invests in small growth stocks, generally with a market value of $300 million or less.

Olstein Financial Alert Fund is managed by Robert Olstein of Olstein Funds in Purchase, N.Y. His portfolio as of March 30 was full of depressed semiconductor stocks, which I think is a smart strategy for investors who can ride out a rough period of a year or so.

Pimco Renaissance Fund is managed by John K. Schneider of Pimco Advisors LP in Newport Beach. He emphasizes depressed stocks that have turnaround potential.

Dreyfus Midcap Value Fund buys stocks between $400 million and $4 billion in market value that it considers underpriced. This fund is not my cup of tea, mainly because I disagree with its choice of ICN Pharmaceuticals Inc. - its biggest position as of June 30.

ICN, of Costa Mesa, sells proprietary drugs, research chemicals and diagnostic products. Its chairman, Milan Panic, is a former prime minister of Yugoslavia. The Securities and Exchange Commission has accused him and two other ICN executives of profiting by selling ICN stock when they knew, but hadn't disclosed, that the Food and Drug Administration had rejected the company's application for approval to sell ribavirin for the treatment of hepatitis C.

The company says there was no wrongdoing and a trial is slated for 2003.

Common interests

The Royce Low-Priced Stock Fund is run by Whitney George of Royce & Associates Inc. in New York. It invests in stocks that it considers undervalued and that, for the most part, trade for $15 a share or less. Mr. George and I apparently think alike. I own shares in five of his largest 15 holdings. His whole portfolio has a strong small-cap value flavor.

I have banged the drum for smaller stocks in this column from time to time since May 1998. So it gives me pleasure to report that most of these six top performing funds are small- or mid-cap funds.

John Dorfman is a columnist for Bloomberg News.

Stocking Up on Winners for Year Ahead

In July 2000, I recommended 10 stocks that each sold for 10 times earnings - a nice, low multiple. Just over a year later, I'm happy to say nine of them rose and their average total return was 41.3 percent.

Compare that to an 18.1 percent drop in the Standard & Poor's 500 Index to July 20 and the Perfect 10 stocks beat the S&P by 59 percentage points.

The best gainer in the portfolio was First Tennessee National Corp., with a 92 percent total return. The only loser was UAL Corp., down 41 percent.

After such a display of stock-market pulchritude, who can resist trying again? So here goes - the Perfect Portfolio for 2001-2002.

To qualify, a stock needs to have a market value of at least $500 million and a price-earnings ratio of between 9.6 and 10.4.

We'll start with Chevron Corp., which is trading at about $86, close to where it was in April 1999. The stock trades for 2.6 times book value (corporate net worth per share) and yields 2.9 percent in dividends. Debt is only 31 percent of stockholders' equity.

Next is Worldcom Inc., whose market value is just under $40 billion. The stock trades at just 0.72 times book value and 1.02 times revenue.

Northrop Grumman Corp., one of my largest holdings for most clients, gets third spot. It's one of the largest U.S. defense contractors, and I like its business blend and valuation, which is only 0.87 times revenue.

Inco Ltd. is. the world's second-largest nickel producer. Its stock trades for about $17 a share, only 0.71 times book value, and, of course, 10 times earnings.

Tommy Hilfiger Corp., a Hong Kong-based clothing company, is another stock I own for several clients. Even though the stock is up 43 percent so far this year, think it represents good value..