Bear market catches Janus with eyes closed
By Al Lewis
Denver Post Business Editor
denverpost.com
Sunday, February 03, 2002 - Janus, we've been told, looks everywhere.
The Denver-based mutual fund company took its name from the two-faced Roman god who sees forward and back. Janus even ran a TV commercial boasting that its analysts will peak under manhole covers to gauge the prospects of an investment.
Throughout the 1990s, Janus built a reputation for thorough research and stock-picking prowess, but its analysts probably weren't crawling into manholes in Houston, judging by the firm's semiannual report of April 30, 2000:
"The world's largest energy trader, Enron, is well-positioned to leverage the ongoing deregulation of power markets in the U.S. and overseas. But it's Enron's focus on another fast-growing area - broadband telecommunications - that we are particularly enthusiastic about. . . . We expect the company to reward us with exceptional results well into the future."
As we previously reported, Janus was Enron's second-largest shareholder as recently as September. U.S. Securities and Exchange Commission filings show it owned 41.4 million shares.
"Clearly, they goofed on Enron," said Russ Kinnell, director of fund analysis at Chicago-based fund rater Morningstar. "It's hard to uncover hidden problems or fraud, but they took a big leap of faith."
Janus spokeswoman Shelley Peterson said the firm's total Enron investments, balancing gains against losses, resulted in a loss of less than one-tenth of a percent of the firm's total investment in Enron. She would not say how much that was.
Enron isn't the only junk at Janus.
The formerly famed stock picker has had huge positions in Cendant, now fending off rumors of a second accounting scandal; Tyco, a manufacturing/services giant now known as Tank-O; the loss-laden America Online; and, not to dwell too much on the past, but Healtheon, an Internet-based medical information company with an unhealthy fever chart.
Most of Janus' funds posted losses for 2001 and 2000 after stellar performances throughout the last half of the 1990s. The firms' assets under management peaked at about $330 billion in March 2000, but are now $175 billion.
Clearly, the fund family can ride the bull, but it can't outrun the bear. And it's painfully obvious to some Janus investors that they are being eaten alive.
Call it a cycle. Janus is a growth fund manager, and, with accounting scandals and a weakening economy, growth stocks seem to do little more than shrink. And Janus is, by no means, alone in the crunch.
"Janus made a lot of money for a lot of people," said Kinnell. "You can't really blame a growth manager when growth stocks fall out of favor."
For now, Janus maintains a loyal investor base because it still has strong long-term performance. This may be of little comfort to those who bought after 1999, but most Janus funds are beating their benchmarks over three-year and five-year periods. And that's what people pay fund managers to do.
Of course, if the bear bites Janus for a third year, its long-term performance could fade into history. That makes 2002 a critical year. If Janus can't grab a bull by its horns, its investors could look at the three-year performance and flee.
"We are confident we can continue to deliver very good long-term performance," Peterson said. "We have the right team in place to turn around and deliver for our shareholders."
Let's hope so. Because if Janus managers don't deliver, their two-faced logo may have only one direction to look: down.
u,.5
Denver Post business editor Al Lewis' column appears Sundays. He can be reached at 303-820-1306 or alewis@denverpost.com. |
