There is general agreement that the type of broad-based rally that was seen in 2003 will be hard-pressed to repeat itself. Some managers, in fact, feel that speculation became a bit too rampant in 2003-causing some to fear that a bit of "irrational exuberance" returned to the market. Inker, for example, feels too many investors were once again oblivious to risk, pouring money into vehicles such as junk bonds and emerging market debt under the belief that the bear market is over "and nothing that bad is ever going to happen again."

Winters feels that after a bit of euphoria in 2003, the rally will continue in a more rational fashion in 2004, with balance sheets, corporate earnings and other fiscal criteria playing a greater role in valuation.

"I think this year is going to be much more situation specific," he says. "The rising tide has lifted all ships, but now it's going to be on a ship-to-ship basis."

Time will also tell whether funds can find the type of ripe bargains that helped fuel last year's rally. This is particularly relevant in the technology and telecom sectors, where many fund managers profited from picking companies in 2001 and 2002 from the wreckage of the Internet bubble. After getting killed in 2000, many of these technology companies rebounded in 2003, breathing new life into a sector that almost single-handedly caused the implosion of the market four years ago. Technology funds, for example, finished 2003 with an average gain of 55.2%, according to Morningstar.

Turner says his firm bought Corning after it hit a low of about $1 per share in October 2002. "It was trading like it was out of business," Turner says. The firm paid about $3 to $4 per share on the expectation that it would make up for losses in its fiber optic cable unit with growth in its flat panel display business. The stock is now selling for just under $12 per share.

Charles McQuaid, manager of the Columbia Acorn Fund and chief investment officer of Columbia Wanger Asset Management in Chicago, says he started buying technology in 2001 and continued through 2003. During this time, the sector was universally hated, he says. It was also a time during which the market went from a state of irrational exuberance to one of irrational fear, McQuaid says. "We used those times as opportunities to buy a number of good companies," he says.

Some of the criteria the company looked for in tech stocks were ongoing revenue from existing product lines, cost cutting and plans for new generations of products, he says.

That led, for example, to the Acorn fund buying Avid Technology, a maker of digital video editing systems used by television programmers. Acorn bought its stock for an average price of $9.80 during 2001 and 2002. The company's current share price stands at about $50. Another success story was the fund's purchase of Novell, which was hammered during the technology bust. McQuaid, however, felt the company's installed base of customers was sizeable and that the company stood to profit åfrom a series of new Linux-related products. They bought the company at $3.90 a share and it has since risen to about $10.65.

The cellular telephone industry, another sector hit hard by the market fall, was also fertile ground for Acorn. The fund started buying Western Wireless early in 2000 and through 2002, at an average price of $7.50 per share. That was down from a high of $75. One reason for the buy: Western Wireless, which provides service in predominantly rural areas, had less competition than the average wireless company. Plus, McQuaid says, insiders were buying the stock through the falloff. The stock is now priced at more than $20.

McQuaid says the fund was looking for companies with good business models and a lot of upside during the downturn. That's still the case, but the job is getting more difficult, he says. "Early in the year it was easy, but as the year went on it got tougher," he says.