NEW YORK (CNN/Money) - Something spooky is happening to telecom funds.

After losing nearly 100 percent since early 2000, the funds have gained 24 percent in the four weeks since Wall Street started its rally on Oct. 10.

Telecom funds are so hot they're beating the Nasdaq (up 19 percent in the same time), the S&P 500 (up 14.6 percent) and diversified U.S. stock funds (up 13.4 percent).

Excluding funds that use leverage, the top performer, Fidelity Select Telecommunications, earned 33.2 percent in that time.

What gives? The telecommunications sector is in such tough shape you'd think Jason from "Friday the 13th" took a whack at it. There have been widespread bankruptcies, accounting scandals, mass layoffs. (Click here for more on the $1 telecom club.)

Telecom funds rise from the dead Top performers since the market started rallying Fund  Returns since Oct. 10  Year-to-date returns  Fidelity Select Telecommunications  33.2%  -34.3%  Rydex Telecommunications  31.3%  -45.5%  Fidelity Select Multimedia  25.4%  -14.4%  Hartford Global Communications  24.7%  -35.2%  Schwab Communications Focus  23.7%  -36.3%   * Excludes funds that use leverage  Source:  Morningstar

It's not a supernatural turnaround. The stocks were so badly battered that the broad market rally has simply lifted them out of the dumps. Big telecom players such as SBC Communications are up 27.5 percent since the rally started. Smaller, more speculative players, such as Time Warner Telecom, are up 26.7 percent. The rising tide is helping all of Wall Street, and the hardest-hit sectors often bounce back faster.

"They're showing signs of life, but I would caution investors not to get too swept away," said Bill Harding, an analyst at Morningstar.

The real question is whether the turnaround will last. Excess capacity and spending are still big problems in the industry. Telecom funds are still down an average of 42.6 percent year to date through Oct. 30, Morningstar said.

Still, there are always the optimists.

Ivan Arteaga, vice president of Gabelli Asset Management, said he thinks telecom companies have done a decent job cleaning up their balance sheets over the past two years. The companies have cut costs and improved cash flow. Looking forward five years, Arteaga is upbeat about the sector.

"What we're starting to see is mainly some benefits from the real strong focus on fixing the house," Arteaga said.

Gabelli Global Growth, with $100 million in assets, is up nearly 13.7 percent since Oct. 10, Morningstar said. (Year-to-date, the fund is down 27.3 percent.)

The Gabelli fund owns stocks such as ATT Wireless and Nextel, which have jumped 49 percent in the rally. Another top holding, Verizon, is up 19 percent. All of the companies are big service providers with strong customer bases and the ability to generate cash flow, Arteaga said.

The funds that survived the best during the bear market -- best being a relative word -- stuck more with media companies rather than pure telecom plays. T. Rowe Price Media & Telecom, for example, used the strategy and lost only 6.9 percent in 2001, beating the category by more than 27 percent, Morningstar said.

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Telecom funds in general are way too risky for most investors, Harding said. Most diversified stock funds have a weighting in tech and telecom. You'll get the exposure but you won't risk huge losses in a downturn.

"Hopefully investors realize by now they don't need a focused sector fund in their portfolio," Harding said.

If you do want to allocate a portion of your portfolio to a telecom fund, make sure it's a small percentage. The only two that Harding would recommend are the Gabelli fund and the T. Rowe Price fund. Both have experienced managers and have held up better than their peers.