Janus Makes Big Bet on Telecom Sector

Janus has spoken, and the word is telecom.

The top-selling Denver growth shop filed shareholder reports for its 15 retail stock funds with the Securities and Exchange Commission Thursday. The reports show several Janus fund managers are hung up on an eclectic trio of stocks that add up to a fat bet on the telecommunications sector: Nokia(NOK Quote - Cramer on NOK - Stock Picks), Texas Instruments(TXN Quote - Cramer on TXN - Stock Picks) and Enron(ENE Quote - Cramer on ENE - Stock Picks).

How big a telecom bet is Janus making? Here's a telling tibdit: In seven of the company's 15 funds, Nokia is the top holding.

The reports, which include an April 30 snapshot of each fund's complete portfolio, offer a glimpse into Janus' coveted and closely guarded portfolio moves. Investors clamor for Janus portfolio information, because in recent years, the mostly large-cap growth funds have made big, successful bets en masse on a relatively small basket of stocks. Even though the snapshot is nearly 2 months old, it's the closest thing investors get to a peek at Janus' blueprint.

"I think Janus-watching is second only to Fidelity-watching. There's almost a cottage industry out there just watching what those two do," says Morningstar senior analyst Scott Cooley. "When people ask me for stock picks, they always want to know what either Fidelity or Janus is doing."

To say Janus managers like Nokia, up 27.2% this year, is like saying Romeo had a passing, mild crush on Juliet. The stock is in 10 of the 15 funds' top 10 holdings. At the end of the first quarter, Janus had invested a whopping $14 billion in the company. Its 5.8% stake made it the largest institutional holder of Nokia shares, more than doubling runner-up AXA Financial's (AXA Quote - Cramer on AXA - Stock Picks) share count, according to bigdough.com, a Web site that tracks institutional stock ownership.

They're not coy about Texas Instruments, either. On April 30, the stock was in nine of the 15 funds, cracking the top 10 in six. Janus had a $5.8 billion investment in the company at the end of the first quarter, according to bigdough.com. That adds up to a 4.6% ownership stake in the company, second only to Fidelity.

The Nokia and Texas Instruments stakes clearly are evidence of Janus' bullishness on wireless telecom. The former is the king of all cell-phone shops, and the latter is a semiconductor concern that dominates the market for digital-signal processors, a wireless-phone component.

Both companies "are benefiting from the explosion in cellular-phone usage worldwide," writes Warren Lammert in his letter to shareholders of the $17.5 billion (JAMRX Quote - Cramer on JAMRX - Stock Picks)Janus Mercury fund.

Claire Young, manager of the $8.5 billion (JAOLX Quote - Cramer on JAOLX - Stock Picks)Janus Olympus, says in her letter to shareholders that Nokia will "play a dominant role in the coming 'Mobile Information Society.'"

Other wireless-telecom plays that turn up in multiple Janus funds are Ericsson(ERICY Quote - Cramer on ERICY - Stock Picks) and Qualcomm(QCOM Quote - Cramer on QCOM - Stock Picks). Each are among the 15 stocks Janus bought the most shares of in the first quarter, according to bigdough.com. Ericsson is up 35.5% so far this year, while Qualcomm is down 63.4%. (On Thursday, it seemed the funds' holdings were ripped from the headlines as rumors swirled that Nokia might buy Qualcomm. Another report mentioned Ericsson as a potential Qualcomm suitor.)

(JAENX Quote - Cramer on JAENX - Stock Picks)Enterprise, which focuses on small- and mid-cap stocks, is playing the wireless sector with positions in PowerTel(PTEL Quote - Cramer on PTEL - Stock Picks), VoiceStream(VSTR Quote - Cramer on VSTR - Stock Picks) and Western Wireless(WWCA Quote - Cramer on WWCA - Stock Picks).

How does energy-concern Enron, up 67.2% this year, fit into this telecom love fest? The company, best known as a natural gas and electricity trader, is pushing into the broadband-telecom market.

"The company is building a global broadband network using its existing interstate gas pipeline as a platform for carrying data from one point to another at very high speeds," writes portfolio manager Karen Reidy to shareholders of the $4.2 billion (JABAX Quote - Cramer on JABAX - Stock Picks)Janus Balanced fund. She expects Enron's telecom efforts to eventually eclipse its energy business.

As you might expect, Janus' Enron position isn't modest. Four stock funds have it in their top 10 holdings, and, firmwide, Janus has $4.9 billion invested in the company, according to bigdough.com. In the first quarter, Janus bought 7.7 million shares, raising its share-total share-balance to 67 million. The firm owns a 9.2% stake in the company, bigger than any other institution.

Obviously these big bets are intriguing to Janus' 4 million fund shareholders, but others should pay attention, too. Due to steep inflows, the $290 billion firm has closed seven of its stock funds and these funds average an 11% cash position. With that much cash to put to work and a new growth fund rolling out at the end of the month, Janus could move its favorites much higher in the coming months.

On the flip side, if Janus sours on one of its bets, that selling pressure can hammer a company's stock.

"There's a danger here, too. They don't strike me as the kind of folks to wait around for a company to turn around. They could dump a lot of shares at once," Morningstar's Cooley says.

There are plenty of other intriguing nontelecom nuggets to be mined from the reports' pages as well. Embattled software titan Microsoft(MSFT Quote - Cramer on MSFT - Stock Picks) isn't in any fund's top 10. Janus significantly reduced its Microsoft stake in the first quarter, according to bigdough.com. Also, Janus managers look bullish on TimeWarner(TWX Quote - Cramer on TWX - Stock Picks), which is in four funds' top 10 holdings and is the top holding in $46.9 billion flagship (JANSX Quote - Cramer on JANSX - Stock Picks)Janus.

The recurring themes swirling through Janus' various offerings are illuminative, but there also are several diverging bets within the Janus empire.

With Janus Balanced, Reidy added enough Citigroup(C Quote - Cramer on C - Stock Picks) and Associates First Capital (AFS Quote - Cramer on AFS - Stock Picks) to make diversified financial services her top industry in the fund. None of the other funds have financials in their top five industries. In fact, Janus (JAVLX Quote - Cramer on JAVLX - Stock Picks)Twenty manager Scott Schoelzel discloses that he's cut down his fund's exposure to financials in recent months in his letter to shareholders. Even $3 billion(JSVAX Quote - Cramer on JSVAX - Stock Picks)Strategic Value, the firm's young value offering, has an underweighting in financials, thanks to manager David Decker's flexible value strategy.

And in a time when most managers are selling dot-com content stocks, Enterprise manager has raised the industry from a 2.6% weighting in October to a 8.4% weighting on April 30. His favorites in the area are Inktomi(INKT Quote - Cramer on INKT - Stock Picks), DoubleClick(DCLK Quote - Cramer on DCLK - Stock Picks) and Network Solutions(NSOL Quote - Cramer on NSOL - Stock Picks), the Net-address wholesaler recently purchased by Net-security specialist Verisign(VRSN Quote - Cramer on VRSN - Stock Picks).