Scrutinizing the Value Managers

The arrogance of these value mutual fund managers! Not only do they have the guts to tell us that we are wrong to own our Ciscos (CSCO) and our Yahoo!s (YHOO), they also insist that they are the only authority on what to buy. And they act as if nobody ever set them straight about their losers even as they tell us to sell our winners.

Case in point to all of you value managers holding Philip Morris (MO). I don't think it could have been spelled out more clearly in these cyberpages what would happen to this stock. For a year now, I have been telling every manager everywhere, this stock is just a goner. But the value guys out there keep flogging it. I have to tell you that if you had warned me substantively about a Legato (LGTO) or a Western Digital (WDC), I would be shaking. But not these arrogant sons of guns.

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I have said repeatedly that management of Philip Morris is going to lose it all to these mass tort plaintiffs' lawyers. I said it in New York Magazine in 1995, and I have said it here at least a dozen times. The managers who are long it still should have to answer to their dereliction of duty.

They can't claim they didn't know this could happen. They can't claim that they didn't see it coming. I don't even think they can claim they were responsible fiduciaries.

The writing has been on the wall for a very long time. But their arrogance and their blind trust in numbers that could go away prevented them from seeing the possibility.

Same thing with these insurers. If you were doing homework, you would know that this rate cycle has taken on a terminal fixation that will lead to the eventual shuttering of some insurers. That's what the stocks are saying. But the value guys won't listen. They won't see. They are blind to reality.

But the worst are the managers who bought the Cokes (KO) and Pepsis (PEP) because they represented growth and now hold them because they represent value.

They represent neither growth nor value, and anybody who reads through the financials knows this. But the value managers don't like to be told they don't know how to do their jobs. They should be ashamed.

Review your holdings in your mutual funds. Do you see big gobs of these growth-turned-value stories? Do you see lots and lots of Philip Morris? Are you in a boatload of insurers? Will your fund even let you know, or are the holdings a closely guarded secret that you can only learn six months after it matters?

If you are in any of those categories, here's a piece of valuable mutual fund advice: Sell your fund. The manager just isn't doing his job.

I know that may seem harsh. But why should this one part of business be immune from the rest of business, where underperformers are not tolerated and managers are routinely dismissed for not delivering?

Take control. Fire these guys.

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