Trashy.....here ya go guy. Welcome to hell
Monday October 29, 4:31 pm Eastern Time
Morningstar.com
Janus Twenty Manager Speaks Out on Another Tough Year
By Christine Benz
``What was the license plate on the truck that just hit us?''
That's what Janus Twenty (NA: JAVLX) manager Scott Schoelzel says he and the other Janus managers were left wondering as the technology and telecom shares tumbled earlier this year.
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Schoelzel said that selling some of the fund's once-largest holdings in these sectors, such as Cisco (Nasdaq: CSCO - news) and Sun Microsystems (Nasdaq: SUNW - news), this past summer helped contain the damage to the fund, but acknowledges that he was too late in doing so.
``I was stunned at how precipitously things fell off a cliff,'' he said in a recent interview with Morningstar.
In all, this once-unassailable fund has shed 57% of its value since the current bear market for growth stocks began in March 2000. That compares with a 46% loss for the typical large-growth fund, and places the fund in the bottom quartile of the large-growth group over the past year.
In response to the weak environment for many of his once-favorite holdings, Schoelzel has maintained an extremely high cash position for much of the year. ``Fundamentals were not getting better,'' he said, ``so I kept selling.'' Cash stood at more than a third of assets at the end of September, according to information provided by Janus. Schoelzel reports that he has been putting money to work in recent weeks, but said that cash accounted for about a fourth of assets as of last week.
In another show of defensiveness, Schoelzel has remade Twenty to give it a decidedly more mainstream look than it had a year ago. Although he has maintained sizable positions in longtime Janus favorites like Nokia (NYSE: NOK - news) and AOL Time Warner (NYSE: AOL - news), Microsoft (Nasdaq: MSFT - news) is currently the fund's only other sizable holding in the hard-hit tech sector.
Instead, Schoelzel has sought refuge in mega-cap financials and pharmaceutical names. In the former sector, he favors Citigroup (NYSE: C - news), American International Group (NYSE: AIG - news), Goldman Sachs (NYSE: GS - news), Bank of America (NYSE: BAC - news), and Wells Fargo (NYSE: WFC - news), among others. Of the drugmakers, Schoelzel likes Pfizer (NYSE: PFE - news) and Eli Lilly (NYSE: LLY - news).
``If Eli Lilly is to this decade what Pfizer was to the '90s, we'll far outperform,'' Schoelzel asserted, hinting that Twenty's bet on Lilly is now a sizable one.
Additionally, Schoelzel continues to like blue-chip stalwarts like General Electric (NYSE: GE - news) and ExxonMobil (NYSE: XOM - news).
``If it doesn't generate a lot of cash, if it's not buying back its own shares, if it's not number one in its industry, then I'm not interested,'' Schoelzel said. ``I would be nuts not to be a little defensive,'' he added.
Schoelzel disputes that the fund's renewed attention to sector diversification and quality makes it an index wannabe, however. Instead, he argues that the fund's concentration in his highest- conviction picks will make the fund more explosive--both on the upside and the downside--than most other funds that buy a similar set of companies.
Schoelzel also says that he's been actively working to build the fund's farm team of mid- and smaller large caps that Twenty can't own in size. In this vein, he cited Genentech (NYSE: DNA - news), Millennium Pharmaceuticals (Nasdaq: MLNM - news), and Human Genome Sciences (Nasdaq: HGSI - news) as a few of his favorite smaller positions. Such stocks, he argues, also will help performance if and when growth stocks return to favor.
When that happens Janus Twenty won't ``be right at the tip of the spear'' like aggressive growth-stock-picker Garrett Van Wagoner's funds. But Schoelzel added, ``I've seen how the fund performs on up days, and I'm happy with it.''
Despite this assertion, it's worth noting that the fund's performance thus far in October, a good month for growth stocks and funds, has been only so-so, as the fund's still-sizable cash position has cut into returns.
Schoelzel said that shareholders have shown a lot of patience in the face of Twenty's steep losses over the past year and a half, however. Further, he said he has no intention of reopening the fund, even though assets have been cut in half over the past year and a half. ``Shareholders have hung in there and need to be rewarded.''
Additionally, he argued that rumors over possible manager defections at Janus, sparked by Janus founder Tom Bailey's decision to sell his shares of the company earlier this month, are overblown. ``People have got to realize that the thing that keeps us all there is getting shareholders back on their feet,'' he said.
Schoelzel acknowledged, however, that many investors won't get back to break-even overnight. ``The days are over of funds returning 50, 60, 70%,'' he said. That's a sobering notion for Twenty's shareholders, many of whom joined the fund before it closed in early 1999, because the fund has shed 40% of its value between then and now. |
