For investors, 2001 is as tough to figure out as

Stanley Kubrick's

film of the same name.

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The Junkie's Perfect Fund Portfolio

On one hand, smart fund managers like

(TEQUX)

Transamerica Premier Equity's Jeff Van Harte

predict a rebound for tech stocks and other high-octane growth sectors in the second half of the year as interest-rate cuts and a tax cut spur growth and demand. But the average tech fund, which lost more than 30% last year, is under water so far in 2001, according to

Morningstar

. And the tech-spending slowdown has eroded profits even at the once bulletproof networking dynamo

Cisco Systems

(CSCO) - Get Report

, implying that few tech shops will emerge unscathed.

On the other hand, the sectors that rose last year, like health care and utilities, are looking expensive. Bill Miller, the only fund manager to beat the

S&P 500

in each of the last 10 years, says aside from financials, last year's leading sectors are going to founder. But financial sector funds are down so far this year, too.

In recent weeks we've talked with managers who run

tech,

utilities,

bond,

growth and

value funds and there's not much consensus. So, instead of trying to predict whether 2001 will be a year for growth funds or value funds, let's check out how one solid value fund shop and one solid growth fund shop positioned themselves heading into this year.

A year-end list of the top-15 firmwide stock picks at Chicago-based value specialist

Harris Associates

, aka

Oakmark Funds

, and Boston-based

MFS

, best-known for a lower-risk growth style, have no names in common. This gives you an idea of where the smart money sees opportunities, and why it's important to own funds that employ different styles.

"If you look at these two lists, it should give you pause," says Morningstar senior fund analyst Scott Cooley. "Here we have two good shops with great records and reputations and they have very different takes on where they should be investing right now. This tells me, as boring as it is, that diversification really matters. You'd actually be able to build a pretty diversified portfolio between the two lists. There's certainly no consensus."

Let's look at Harris Associates' picks first. At Harris, home of savvy value maven Bill Nygren, they look for stocks they believe are trading well below their true value. Portfolio managers and analysts hash out their ideas and build a cumulative list of stocks they see as attractive opportunities. From that list, here are the 15 stocks in which they had more than half of their clients' assets invested at the end of last year.

These stocks are generally cheaper than the market, and beat the overall market over the last 12 months. There are at least three immediate conclusions we can draw from this list of stocks with lower valuations but better performance relative to the S&P 500: They're seeing value in small- and mid-cap stocks; they're not seeing value in battered tech stocks yet and they're one of the few

AT&T

(T) - Get Report

fans in the fund world.

Only four of the stocks on this list are big caps: savings and loan

Washington Mutual

(WM) - Get Report

, tech consultant

Electronic Data Systems

(EDS)

, sagging phone giant AT&T and franchiser

Cendant

(CD)

, which has the likes of

Century 21

,

Ramada

and

Avis

under its umbrella.

The others are smaller fry, which is looking pretty smart, with small-cap value and mid-cap value funds among the leading fund categories this year. Nygren's mid-cap value

(OAKMX) - Get Report

Oakmark fund is up 39% over the last year, beating more than 80% of its peers, thanks to stocks like

Mattel

(MAT) - Get Report

and AT&T, up more than 30% this year after losing more than half its value in 2000.

"I think Harris' list is really intriguing because a lot of their funds have the leeway to invest in any size company and they've chosen to invest in the small- and mid-cap space," says Cooley. "The one brand-name stock that shows up in their holdings is one that most managers hate. That's AT&T."

Indeed, about 30% of big-cap growth funds owned AT&T at the start of last year and that percentage dwindled to 12% by the end of 2000 as managers found faster earnings growth in hotter tech and telecom markets. Just last month

Nygren pounded the table for the stock, saying it was overly punished and worth far more than its trading range around $20.

That said, it's not as if the folks at Harris are among the chorus shouting about values in the tech and telecom sectors. Only payroll and personnel outsource shop

Ceridian

(CEN) - Get Report

, EDS and local phone service company

Citizens Communications

(CZN)

have tech or telecom labels, according to Morningstar.

For a more high-octane, growthy approach, let's check out the MFS faves.

For an idea of how MFS invests in growth stocks, consider its broker-sold

(MIGFX) - Get Report

MFS Massachusetts Investors Growth Stock fund, where Stephen Pesek and Thomas Barrett hold the reins. In keeping with the firm's growth style, the pair focus on companies in thriving sectors that are growing their earnings and free cash flow faster than their peers.

Unlike many growth managers, however, they tend to be a bit more price-conscious. That has helped funds like Mass Investors Growth Stock ring up solid returns vs. their peers with less volatility. Consider that the fund beat its average big-cap growth fund peer in both frothy 1999 and last year's tough market.

This methodical approach is probably a good fit for most individual investors.

"The MFS list has more big, core stock holdings," says Cooley. "You look at the MFS stuff and I wouldn't say this is the most speculative part of the market they're investing in, but they're more willing to pay up for growth than Harris. Compared to

growth specialists

Janus

or

PBHG

, they're more risk-averse, and there's something to be said for that these days."

While many of these stocks aren't cheap, the list leans toward big, established companies that might be good choices for long-term investors. While many of these stocks have taken a licking over the last year, on average they're in the black. Of course that's probably thanks to a definition of growth that extends beyond technology into low-tech fare like grocer

Safeway

(SWY)

, mortgage lender

Freddie Mac

(FRE)

and

United Technologies

(UTX) - Get Report

, which makes everything from elevators to planes. The lift-off these stocks saw last year helped make up for the tumbles of Cisco and

Microsoft

(MSFT) - Get Report

.

Given that both shops went their own way to eclectic top picks that beat the S&P 500, it looks as if the value of diversification really is being borne out again. Maybe this year won't be so tough to understand after all.

The Junk Pile

You can hear directly from the folks at Oakmark in Monday's

Fund Junkie

. That's when we'll hear from Greg Jackson, co-manager of the

(OAKGX) - Get Report

Oakmark Global fund which has topped just about all its peers over the last 12 months.

Fund Junkie runs every Monday, Wednesday and Friday, as well as occasional dispatches. Ian McDonald writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

imcdonald@thestreet.com, but he cannot give specific financial advice. Editorial Assistant Dan Bernstein contributed to this article.