The dramatic rise in the value of small growth-company stocks is an answer to prayer for investment letters.

No one much needed the advice of pundits the past few years when highly publicized, well-researched blue chips were the favorites of a cautious public. Investment letter subscriptions faltered. There was little interest in the diamonds in the rough that these publications traditionally thrive on.Perhaps investors have had their speculative appetites whetted again. There's been a near-50 percent gain in small-stock indexes since last October, and they haven't faltered as much during recent market pullbacks as their larger brethren.

"It's a great boost to the newsletter industry," observed Mark Hulbert, editor of the Hulbert Financial Digest, which tracks the nation's investment letters.

"Biotechnology provided my biggest stock winners last year and the same holds true this year," said Jim McCamant, editor of the Medical Technology Stock Letter. "However, I expect a significant correction of 25 percent or more in the next quarter, at which time there will be a buying opportunity and another rise should begin."

His portfolios averaged a 14.6 percent gain last year, with Synergen Inc. doubling in price. Stock of Chiron Corp., Immunex Corp. and Xoma Corp. rose 50 percent. This year, his portfolios are averaging a 47 percent increase. He's buying more shares of Xoma, Biotechnology General and Chantal Pharmaceutical.

"While I was bullish about small-company stocks, I didn't expect the blue chips to be quite so strong as well this year," said Jack Bowers, editor of the Fidelity Monitor newsletter, whose two portfolios posted an average gain of 12.6 percent last year. Bowers' portfolios, which invest exclusively in Fidelity Investment funds, have had an average gain of 23 percent in 1991.

He's convinced that small-company stocks will post solid gains for the rest of the year. So, two-thirds of his model growth portfolio is in Fidelity's Growth Company Fund, which specializes in technology and health-care stocks. Major holdings include Compaq Computer, Pfizer Inc., Cisco Systems, Microsoft Corp. and National Medical Enterprises. The remaining third of the portfolio is in Fidelity Select Food and Agriculture, a portfolio featuring Philip Morris Cos., PepsiCo, Coca-Cola Co., CPC International and Nestle.

His other portfolio, featuring funds from Fidelity's Select group, is completely in Fidelity's Medical Delivery Select fund, which holds stocks such as U.S. HealthCare, Community Psychiatric Centers, Humana and National Medical Enterprises.

Overpriced Stock Service newsletter's portfolio gained 35.7 percent last year by short-selling the stock of banks, airlines and oil companies. (Selling short is the selling of a security not owned by the seller, to take advantage of a price decline.) But it's down 32 percent this year, editor Michael Murphy blaming "the worst squeeze on shorting in history, in which the junkiest companies' stocks ran up the furthest."

Murphy forecasts a long recession, which could turn into depression. He's short-selling airlines, specifically USAir, American and Delta; Asian companies, such as Sony Corp. and Kyocera Corp.; defense companies, such as McDonnell Douglas and Northrop Corp.; real estate firms, such as Rouse Co., New Plan Realty and H.F. Ahmanson & Co.; and banks, such as Bank of Boston, Citicorp and Chase Manhattan.

"We've basically focused on the excesses from the last cycle," explained Murphy.

The investment letters mentioned include:

Hulbert Financial Digest, 316 Commerce St., Alexandria, Va. 22314, which offers a $37.50 five-month trial subscription.

Medical Technology Stock Letter, P.O. Box 40460, Berkley, Calif. 94704, with annual subscription price of $260 for 24 issues.

Fidelity Monitor newsletter, P.O. Box 1294, Rocklin, Calif. 95677, has a six-month subscription rate of $48 for its monthly issues.

Overpriced Stock Service newsletter, P.O. Box 307, Half Moon Bay, Calif. 94019, charges $495 annually for its monthly publication and telephone hotline.