Can Janus Twenty Repeat 73 Pct Return From '98?: Personal Funds
Bloomberg News
February 9, 1999, 4:33 p.m. ET
Can Janus Twenty Repeat 73 Pct Return From '98?: Personal Funds
Denver, Feb. 9 (Bloomberg) -- The Janus Twenty Fund had few
peers in rewarding investors last year. The $16 billion fund,
named for its ownership of 20 or so stocks, returned 73 percent,
placing it No. 4 of 956 growth funds tracked by Bloomberg Fund
Performance.
The Janus Twenty's success was a triumph of shrewd stock-
picking and terrific timing. It invests assets in many of the
biggest and best known U.S. companies. In 1998, big stocks
delivered strong returns as investors sought the safety of large
companies instead of the risks presented by small ones. Clearly,
size mattered.
''I am looking to own companies which have a multitude of
products that you and I are using more and more in our daily
lives,'' said Janus Twenty manager Scott Schoelzel, 40. ''This
covers everything from telecommunications to pharmaceuticals to
financial services.''
This year, however, investors are fretting that big
companies' prices don't justify their earnings prospects. So far
this month, Microsoft Corp. has fallen 9 percent, Intel Corp.
fell 11 percent, Cisco Systems Inc. by 14 percent and Advanced
Micro Devices lost more than a quarter of its market value.
Likewise, the Janus Twenty tumbled about 4 percent.
Schoelzel remains unfazed by the carnage. ''Last week, you
saw the natural rhythm of the marketplace,'' he said.
Janus Capital Corp.'s fund rose 7 percent two weeks ago,
from Jan. 25 to Jan. 29. It's still up 7.6 percent this year --
10 times the rise in the Dow Jones Industrial average and 17
times the increase in the benchmark Standard & Poor's 500 Index.
''If you hold the stocks in the portfolio for the long term,
you're going to be rewarded because these are world class
companies,'' Schoelzel. ''If you want to hold them for a week and
then sell them because they fell, over a few days, then you're on
your own.''
Schoelzel was on vacation last week and didn't feel a need
to return to Denver to shake up the portfolio.
''If you get preoccupied with the day-to-day moves of these
stocks, you'll drive yourself crazy,'' he said. ''The future is
very much still in front of these companies..''
Schoelzel said he runs the fund ''the way a lot of
individual investors would run their own portfolios. They own
four or six or eight or 10 stocks at one time -- not 150. The
best stocks are often the ones you already own.''
Following are six criteria to help investors determine
whether this fund is suitable for them.
Contents
By owning shares in a small number of companies, Schoelzel's
fund has lower operating costs and less turnover of stocks than
most funds.
Schoelzel has not been afraid to rearrange the stocks in the
fund. He sells a holding when it appears it can no longer grow at
a rate that surpasses other companies of its size. Over the past
12 to 15 months, Schoelzel said his fund has sold off Merrill
Lynch & Co., First Data Corp., UAL Corp. and Dupont Co.
Last April, his fund's top 10 holdings consisted of: Dell
Computer Corp., Pfizer Inc., Microsoft Corp., Warner-Lambert
Co., General Electric Co., America Online Inc., Monsanto Co., Eli
Lilly & Co., Cisco Systems Inc. and Lucent Technologies Inc.
Since April, Schoelzel has tinkered with the list. Now, it
encompasses Finland's Nokia Oyj, the No. 1 digital phone maker,
according to Dataquest Inc.; entertainment and media giant Time
Warner Inc.; MCI WorldCom Inc., the second-largest U.S. long-
distance phone carrier; and American International Group Inc.,
the largest U.S. insurer by market value. Those four stocks have
replaced Warner-Lambert, Lilly, Monsanto and Lucent in the
portfolio.
Schoelzel said he gets his fill of the Internet explosion by
owning AOL, Cisco and Dell. The fund also owns a small piece of
Amazon.com Inc. the Internet book seller.
Schoelzel wants to get a better read on the investment
prospects of the Internet companies before he commits too much
money to it. He is willing to be patient and typically buys
hundreds of thousands of shares of a stock at a time.
''This thing is going to play out over a long period of
time,'' he said, referring to the Internet's growth. ''I'm not
sure who will be the winners or losers. My strategy is to work my
way slowly into a stock.''
Before making a move in the portfolio, Schoelzel inspects a
company's revenue line, operating profit, prospects for expansion
into a new geographic or product line.
''I always this simple question: ''Is it getting better or
worse or staying the same,'' he said.
Risks
The biggest risk is that the fund owns only 29 stocks now.
With such a concentrated portfolio, the risk-to-reward ratio is
heightened. If only a few stock prices tumble, Schoelzel's fund
could be hurt badly. Many other funds own three times or more the
number of stocks in an attempt to reduce the risks.
Schoelzel has no illusions that he will bang out a stellar
return of 73 percent every year.
''It's not going to be a straight line of growth,'' he said.
''There will be a treacherous journey along the way. There will
be a quarter or two out there where we're going to struggle.''
Performance
The fund has been a solid performer, returning at least 27
percent in each of the past four years. Having AOL and Dell as
its two biggest holdings last year help catapult the Janus
Twenty. In 1998, AOL returned 586 percent and Dell gained 249
percent.
Leadership
Schoelzel has roots in Colorado, graduating from Colorado
College. He also manages the Idex series of growth funds. Before
he started managing the Janus Twenty Fund in 1997, replacing
Thomas Marsico, he managed the Janus Olympus Fund, whose returns
have approached those of Janus Twenty.
Costs and Taxes
The fund's management fees and operating expenses are .91
percent or $9.10 for each $1,000 invested. That compares to fees
and expenses of $1.45 for the average large growth fund,
according to Morningstar Inc. The fund paid capital gains of 30
cents a share last year.
Personal Fit
Janus Fund seeks growth of capital. It may be considered a
core investment since it holds primarily common stocks, and the
investments tend to be in many of the nation's largest and best
known companies.
Fund facts:
Direct purchases/sales: 800-525-8983
Janus Capital Corp.
100 Fillmore St.
Suite 400
Denver, CO 80206
The fund has a minimum investment of $2,500.
These are the fund's top ten holdings:
Dell Computer Corp.
Pfizer Inc.
Microsoft Corp.
General Electric Co.
America Online Inc.
Cisco Systems Inc.
Nokia
Time Warner Inc.
MCI WorldCom Inc.
American International Group Inc.
--Jon Friedman in the New York bureau (212) 318-2337 /daa
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