(MONEY Magazine) – In our March issue, we suggested that you stop chasing overvalued growth stocks and go where the herd wasn't grazing ("Invest Against the Grain"). This led us to unpopular spots like commodity stocks and overseas markets that had been beaten up since Thailand devalued its currency in mid-1997. We were betting that investors would eventually embrace these unloved sectors. What we didn't expect was that sentiment would turn so quickly. So be warned when you hear of others talking up cyclicals or emerging markets as sure things to rebound; the easy money has been made.

When we went to press in late January, oil was trading at $12.51 a barrel. Now it's around $20, its highest level since mid-1997. Our research found that the best way to play a surge in black gold was with oil service companies, which had fallen by more than half from their 1997 peaks. We liked Halliburton best, and it turned out to be a good call. Since then, its shares have climbed more than 50% to a recent $45. For those of you who followed our advice and were looking for a short-term pop, consider selling some or all of your stake. One problem: Halliburton's profit estimates have been coming down for this year (to 88[cents] from $1.29 six months ago) and next (down 17% to $1.43). The stock already reflects the rise in oil prices, but oil companies have yet to increase their exploration and production spending--a key indicator for Halliburton. The company is also in the midst of digesting a large acquisition, which is creating a drag on earnings.

Steel and aluminum were two other commodities we highlighted, arguing that they should benefit from the improving global economy. The two stocks we chose were Steel Dynamics, a maker of flat-rolled steel, and Alcoa, the aluminum industry leader. While shares of Steel Dynamics spiked above $20 in mid-Apri1, they've fallen to a recent $17.25, marginally higher than where we had recommended the company. Although its earnings growth looks strong, Steel Dynamics must compete in a market for steel that remains depressed. What's more, the U.S. steel industry's charges of dumping by foreign steelmakers--a touchy political issue--raise the prospect of a nasty trade war. We're inclined not to fight the tape on this one and suggest cutting it loose. Alcoa is a different story. Its stock has split two for one and risen 46% since late January to a recent $61. Morgan Stanley Dean Witter analyst Wayne Atwell notes a turn for the better in worldwide aluminum fundamentals, as inventories have fallen and demand has picked up this year, leading to firmer pricing. Atwell has raised his earnings estimate on Alcoa to $4.35 a share for 2000 and upgraded it to a strong buy. We'd stick with it.

Our fund choices have scored impressive gains. The Warburg Pincus Japan Small Company Fund is up 113% this year, powered by huge gains in issues such as Docomo, the mobile phone spin-off of Nippon Telephone and Telegraph. Our emerging market funds, Nicholas-Applegate Emerging Country and Pioneer Emerging Markets, are up 30% and 33%, respectively, this year. And the closed-end Templeton Emerging Markets Fund is up 34%.

While these are wonderful returns, they come after a year when emerging markets funds and stocks were woeful performers. And remember that emerging markets will continue to be highly volatile; Latin America still suffers from potential currency and recession miseries. So Japan may be the safer bet going forward. Its turnaround remains in the early stages, and this year's gains could be just the beginning of a long-term advance.

--PABLO GALARZA