When did
Janus know that the fundamentals were deteriorating at its key holdings, and why did it do nothing about it? Without answering these questions, it is impossible to know what to do with the Janus funds.
You see, money managers are supposed to sell when they find out that the fundamentals have taken a turn for the worse. They can't ignore the fundamentals. They can't go "long term" on us. That's not how successful money is run in this country. We know that, because, what happens is that the money gets taken away if you run it that way. And once the money gets taken away, you get the dreaded spiral of
underperformance and redemption that Janus is experiencing right now.
It is OK, for example, for
Warren Buffett to stick with
Coke (KO Quote - Cramer on KO - Stock Picks) or even
Gillette (G Quote - Cramer on G - Stock Picks) if they falter. He has control over the money. But with a mutual fund the control rests with you, the shareholders, and we know that shareholders do eventually vote with their feet when they sense that something has changed.
That's why Janus can't afford to sit there and do nothing as a
Cisco (CSCO Quote - Cramer on CSCO - Stock Picks) or a
PMC-Sierra (PMCS Quote - Cramer on PMCS - Stock Picks) or a
Broadcom (BRCM Quote - Cramer on BRCM - Stock Picks) goes up in flames. It has to take action. Perhaps, though, Janus got too big? Perhaps it was afraid to take action, for fear that it would accentuate a downward spiral in the same way that its incessant buying of its few favorites moved these stocks up effortlessly.
This Janus story is the story of the undoing of the leadership of the old bull market. It demands to be followed because it is the flip side of the deterioration of the fundamentals. It is what is keeping a lid on the "good" stocks in the Janus portfolios.
Why focus on the run on Janus? Because, as I have said a gazillion times in this publication, it is not enough to know the fundamentals of a stock to figure out if it is going up or down. You also need to know the flow of funds. And the flow of funds out of Janus is a larger story than the fundamentals for some companies right now.
Random musings: Free
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Jim Cramer
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