09/14/98 SO YOU WANNA BE CONAN THE CONTRARIAN...

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SO YOU WANNA BE CONAN THE CONTRARIAN...

Amid the last great bear market, the 1973-74 fiesta that sent stocks halfway to oblivion, there was one guy couldn't stop buying. Even as other investors dumped their shares of such companies as Ford, Dean Witter, and Ogilvy & Mather, he snapped them up, using not just the cash he had saved but raising $20 million more to keep going. It was pure contrarian bravura--and it worked for Warren E. Buffett.
Is today another such moment? That's debatable. But if you're intent on being a buyer right now, you're going to need the same raw material--cash--that the legendary investor could hardly get enough of 25 years back. And if you do your investing through mutual funds, consider focusing on those that went into the summer sell-off sitting atop tidy piles of the green stuff.
With stock prices 18% lower than they were just seven weeks ago, mutual-fund managers who are armed with plenty of cash have the means to make the most of the new market. ''If you are looking to get into a fund,'' notes Kevin McDevitt, an analyst at Morningstar Inc., ''you want someone who has cash on the sidelines and can take advantage of opportunities.''
PICKING AND CHOOSING. To spot such funds within the 4,500 U.S. stock mutuals, BUSINESS WEEK searched Morningstar's Principia database and came up with a list of possibilities. We stuck to funds that are open to new investors for initial stakes of no more than $5,000 and those that held at least 25% of their assets in cash before the market plunge.
What have these funds been doing with all that dough? In a word, buying. ''We're getting a chance to buy things more on our terms,'' says Mark O. Robertson, a manager of Vontobel U.S. Value Fund. Its cash level early this summer ran at 33%. Now, it's closer to 20%, as the fund has bought blocks of McDonald's, Sherwin-Williams, Coca-Cola, and American International Group. Robertson now hopes to pick through the wreckage among big bank stocks such as J.P. Morgan & Co., down from its high. ''It would be nice if we don't have a spike back up in the market and have the time to evaluate things,'' he says.
''FUSSY.'' Berger Select's Patrick S. Adams closed August with 38% of his fund in cash and swiftly cut that to 28% on Sept. 1 as he loaded up on technology, financial, and consumer stocks. ''It's just extraordinary, the carnage that has occurred,'' Adams says. ''The bargains are much more prevalent now than in 1987.''
Not everyone is so enthusiastic. ''We're being fussy buyers,'' says Michael Sandler, Clipper's co-manager. He aims to buy stocks in companies at 60% to 70% of their underlying value and reports finding few of those gems, even now. ''I'm nibbling,'' says Oppenheimer Growth's manager, Robert C. Doll Jr.
Clipper and other cash-rich funds have suffered under loads of greenbacks that earned money-market rates while rivals, carried by the bull's long run, charged past. But if the market rallies again, these funds will have a turn to show what they can make of capitalism's most basic building block.
By Robert Barker in Melbourne Beach, Fla.

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