When it comes to playing the stock market, the public, or the individual investor, is often referred to in Wall Street lingo as the “dumb money,” while funds, or institutional investors, are regarded as the “smart money.”

That dumb money moniker surely doesn’t apply this year. In a turnabout, the public was smart enough to have capitalized on this year’s rising market by having snapped up roughly $10 billion worth of American equity mutual funds, or an average of $2 billion a month in the first five months, according to liquidity tracker TrimTabs Investment Research of Santa Rosa, Calif.

In effect, that $10 billion represents nearly a third of the roughly $33 billion of equity fund purchases made so far this year. The remaining two-thirds of the buying was done by institutional investors.

The skipper of New York-based Integre Advisors, Manny Weintraub, who manages $230 million of assets, says he thinks the buyers were not only right at the outset of the year, but that he expects they’ll also be on the money for the balance of the year if they hold tight. As he sees it: “It’s not a stretch to see the S&P 500 at 1,648, or up about another 8% before year end. The game is far from over.”

A key reason why Mr. Weintraub, a former managing director of Neuberger & Berman, is so enthusiastic is his expectation of a continuation of the mergers and acquisitions boom. Citing statistics from TrimTabs, he notes that about $300 billion, or 1.4% of all American stocks, were taken out of the market through a combination of M&A activity and share buybacks in the first four months. With interest rates low and Corporate America flush with cash, Mr. Weintraub sees no reason to think there won’t be a lot more equity shrinkage, which, he notes, would be a major and ongoing plus for the market.

Other reasons why he believes it’ll be up for stocks the balance of the year include:

• The market is selling at a relatively cheap valuation — 16 times earnings, versus 24 in 2000.

• A lot of pessimism, which is usually a good contrary indicator.

• Plenty of attractive yields on mega-cap stocks, with 3% and 4% payouts not hard to find. Some examples: Citigroup, 3.9%, and Kraft, 3%.

• While there’s a tug of war between the consumer pulling back and companies moving full steam ahead, the American economy, thanks in good part to global and export growth, should be okay the rest of the year.

• Corporate earnings, following a better than expected firstquarter showing, should continue on an upward trend and achieve about an 8% to 10% gain for the year.

Integre Advisors has two portfolios — one diversified that consists of 25 stocks, the other concentrated that’s made up of 15 stocks. The firm’s assets are split 50-50 between the portfolios, which are up this year 10% and 12.7%, respectively.

A defensive strategy is Mr. Weintraub’s favorite approach to the market. In this context, he favors software companies with a lot of free cash flow (notably Symantec, Oracle, and Microsoft), noncyclicals (Kraft, Coca-Cola), and utilities (Dynergy).

What about energy stocks (still a darling of many institutional investors despite their big gains)? “We’re underweight energy,” Mr. Weintraub says. To be bullish on oil, he observes, one has to feel the price of this commodity will continue to move higher. That’s not what he believes. To the contrary, Mr. Weintraub says he thinks “we’re nearing the end of the runup.”

OPEC, he points out, “sees consumption here being impacted and it doesn’t want oil prices to rise to the point where we get real serious about energy alternatives.”

Mr. Weintraub also takes a dim view of most industrial companies, particularly steel and autos, noting that “there’s too much optimism around them these days.”

As for those rampaging overseas markets, he says he would shun them at this point. “It’s too late the party; the risk-reward is not great,” he says.

Several market pros have expressed concern to me about possible negative market implications arising from next year’s presidential election. Mr. Weintraub doesn’t share that worry, noting that “anything of a political nature that might be bad news is already in the market.” That same thinking, he says, applies to the conflicts in the Middle East.

dandordan@aol.com