REPEAT PERFORMANCE Stock Funds Notched 1% Gain In May, Led By Small-Cap Value Offerings.(FUNDS & PERSONAL FINANCE)(IBD'S MONTHLY REVIEW & OUTLOOK)

Byline: Ken Hoover

Domestic stock funds posted modest gains in May, giving them a two-month winning streak.

The gains didn't seem like much. But given the yearlong stock market slump, they've got to cheer investors.

The average U.S. diversified stock fund rose 1% in the month, according to Lipper Inc. That compares with a 0.51% gain for the month in the S&P 500, a 0.27% drop in the Nasdaq and a 2.3% gain in the small-cap Russell 2000.

Year to date, the average stock fund slipped 4.65%. That looks pretty good next to a 4.88% decline in the S&P 500 and a 14.57% drop in the Nasdaq. But check out the Russell 2000: It climbed 2.68%.

Therein lies what's going on in the market. Small stocks are outperforming big ones.

And value stocks are beating growth stocks.

That …