Smarter Money: These Funds Have No Excuse Anymore

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So what exactly is my beef with these big tech mutual funds? What do I find so outrageous and arrogant about them? Why do I keep picking on them? Because they let us down. Because they told us that they knew more than we did, that they were closer to the companies than we were, that they did more research than we did and that they would see any downturn coming.

Two fund companies, in particular, gall the heck out of me: Janus and Firsthand. I can't tell you how many times I listened to those Janus commercials talking about how Janus did more homework than anyone else. All last year when I heard or read about problems in their largest holdings, I kept thinking, "They will sell. Surely, they must see what I see coming, what I read about, what I know. Surely they at least read Herb Greenberg, who, over and over again, brought up fundamental problems in many of their holdings. They claimed to read me, but they definitely didn't or they would have cut back on merchandise I kept talking about."

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Homework? They may have done it when they got in, but they either stopped doing it once they bought, or they didn't know how to sell when things got bad, or, worst of all, structurally, they were so overweighted in the same stocks that they couldn't sell without destroying those stocks. So they settled on the slow bleed they have endured all year.

When it was clear that this style of concentrated investing could have devastating consequences and the market lifted in January, did they reposition? Did they lessen exposure? Did they figure out ways to sell some of the more concentrated holdings? Nah, they didn't do squat. So they neither served you fundamentally, as the fundamentals deteriorated for many of their companies, nor as a fiduciary. They created their own destruction.

But far worse than Janus was Kevin Landis at Firsthand. This guy made a career out of telling you that he was closer to these companies, these great tech companies, than anyone. He made a point of telling people that he was so close that if problems surfaced he could readjust. What a bunch of baloney that turned out to be.

This guy saw nothing coming. When a confident hedge fund manager like Larry Bowman said that many of the companies that Landis was in were faltering badly, Landis did nothing. When Cisco(CSCO Quote) said that it had way too much inventory, Landis didn't take any action and he was the biggest proponent of the component vendors to Cisco.

Worst of all, he came back on television, smug as ever, telling us everything was OK a month ago and that he felt that we were in a terrific buying mode for many of the stocks that have subsequently fallen apart.

OK, maybe you think, mutual fund managers shouldn't have hefty cash positions because they are supposed to be your tech exposure. But where is it written that you are supposed to stick with stocks with deteriorating fundamentals? And if it is written, why do these funds advertise or promote themselves as managers who have done more homework and are close to the companies? You can't have it both ways. You can't say you are close to the companies and then elect to own them if you know things have gone sour. Or, maybe you didn't know that things had gone sour, and you weren't that close to the companies.

But to claim that you were that close and to put your shareholders through this form of Armageddon despite that closeness? Well, let's just say you better come up with a new pitch for the next round of investment dollars. How about something like this: "When we take a position, we stick with it regardless of the fundamentals because we don't care and we don't sell because we don't want to inflict losses on you."

Ah, now that would have the added advantage of being true.

Random musings: To the guy who was furious at me because he sold (JAVLX Quote)Janus Twenty at the bottom: You are back to the bottom. You can go buy it back and stop blaming me for your losses. Or you can say to yourself, "Did Cramer lose that money for me, or did Janus?" Last I looked, I don't work at Janus. Don't expect to anytime soon, either.