Some Tech Funds Sitting Out the Rally

Have your growth or tech-fund managers stuck to their guns? Their performance over the past 90 days should give you a hint.

Thanks to the Nasdaq's rally since its Sept. 21 bottom, tech and tech-heavy growth funds are bouncing after being in the cross hairs of a sagging economy and stock market. But a closer look shows that this rising tide is lifting some boats higher than others. Several growth funds that rode fat tech stakes to huge gains in 1999, including some Janus funds, have adopted a more diversified approach that has held them back during this surprising rally.

The upshot: Portfolio managers routinely say they're not changing their style, but it seems that the past years' pain has motivated some to mellow, just as the high-octane growth style and mercurial tech sector have started down the long road to recovery.

The tech-laden Nasdaq is down 62% from its peak last year, but it's up 37% since Sept. 21, the first day of trading after the terrorist attacks of Sept. 11. Though still under water over the past year, tech and growth funds comprise four of the top-five performing fund categories over the past three months, according to Chicago research house Morningstar.

Rousing The tech sector and growth style are waking up
Category	90-Day Return	One-Year Return
Technology	31.4%	-38.6%
Small-Cap Growth	22.6	-6.1
Mid-Cap Growth	19.4	-20.1
Small-Cap Blend	17.8	12.3
Large-Cap Growth	17.6	-22.9
S&P 500	16.2	-8.8
Source: Morningstar. Returns through Dec. 20.

But some of the tech and growth funds that soared with tech stocks in 1999 are eating their competitors' dust.

The (WWWFX)Kinetics Internet fund, for instance, rose 217% in 1999 but is up just 8.9% over the past 90 days, compared with 31.4% for its average peer. The reason is that the fund, like many tech funds, actually hasn't been holding many tech stocks. That kept it ahead of its peers during tech's recent free fall, but won't bear up well when the sector gets back on its feet.

The (MGFQX)Millennium Growth fund, a big-cap growth portfolio that rose 103% in 1999, is down 0.4% over the past 90 days. That trails nearly all of the fund's peers, due to some poor choices in the tech sector and a cash stake north of 20%.

There are also some examples of mellowed growth funds in the Janus fund family, where big tech stakes and big gains led to a more than 80% gain for its average stock fund in 1999. While all of the Denver firm's 10-biggest stock funds beat their average peer that year, several are lagging the pack over the past 90 days, thanks to a less aggressive approach.

Over the past three months, the firm's (JAVLX)Twenty and (JAENX)Enterprise funds are up about 15%. That sounds good because both former highfliers are now under water over the past three years, but those three-month results trail more than 80% of their peers and the S&P 500. The (JAMRX)Janus Mercury fund, which rose 96% in 1999 and still leads its peers over the past three years, is up only 12% over the past three months. That trails more than 90% of its peers and reflects a less aggressive portfolio.

Decaf? Looks like some of Janus' biggest funds are less tech-obsessed
Janus Fund	90-Day Return	Rank vs. Peers (1=Best, 100=Worst)	1999 Return	Rank vs. Peers (1=Best, 100=Worst)
(JAOLX)Olympus*	23.9%	16	100.1%	4
(JANSX)Janus*	19.8	42	47.1	29
(JAWWX)Worldwide*	17.3	15	64.4	16
(JAOSX)Overseas*	17.3	7	86.1	9
(JAVLX)Twenty*	15.4	82	64.9	14
(JAENX)Enterprise	14.6	87	121.9	9
(JAGIX)Growth & Income	14.6	86	51.2	23
(JAMRX)Mercury	12.4	93	96.2	5
(JABAX)Balanced	7.8	65	23.5	5
(JAGLX)Global Life Sciences*	11.4	66	61	10
S&P 500	16.2	N/A	21	N/A
Avg. U.S. Stock Fund	14.8	N/A	28.4	N/A
*Closed to new investors. Source: Morningstar. Returns through Dec. 20.

In Janus' latest shareholder report, filed last week and covering the six months ending Oct. 31, Mercury manager Warren Lammert acknowledges a broader taste. "We spent the better portion of the fiscal year attempting to achieve greater balance with respect to industry exposure," he wrote to shareholders. "In doing so, we either trimmed or liquidated a number of our technology holdings, wireless maker Nokia (NOK) and supply-chain management software company i2 Technologies (ITWO) being notable examples."

New additions to the fund's top 10 holdings are decidedly low-tech: drugmaker Pfizer(PFE), financial titan Citigroup(C) and Berkshire Hathaway (BRK.B), the insurance-heavy holding company run by legendary bargain-hunter Warren Buffett.

We noted Janus' shift toward a more diversified approach in their third-quarter trades and recent year-end press briefing, but these returns confirm a less aggressive approach. That said, it's hardly an example of groupthink. Funds like (JAOLX)Olympus, (JAWWX)Worldwide, (JAOSX)Overseas and the flagship (JANSX)Janus fund have bounced higher than their peers.

And many funds that went from first to worst during tech's nuclear winter, like (FDEGX)Fidelity Aggressive Growth, (VWEGX)Van Wagoner Emerging Growth and (ATCHX)Amerindo Technology, are riding high again.

No doubt some will see sharply rebounding growth funds as the sucker's bet that they were in 1999, because the funds will continue to buy highfliers in good times and big losers when times get tough in Silicon Valley. Others will say that fund managers who've mellowed are changing their stripes at precisely the wrong time -- just as things are starting to turn their way.

The bottom line is that some portfolio managers, like many investors, are stepping more carefully in the wake of the past two years' losses. If your manager seems too mellow or too aggressive for your taste, screening funds' performance over the past 90 days gives you an intriguing way to start differentiating between die-hard growth investors and shyer types.

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