The rough times for Finnish cell-phone maker
might seem pretty remote if you don't own its stock. But if you own shares of a
fund, the ticker symbol NOK might be where some of your money has gone to die over the past year.
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Handset Makers May Be Selling Into the Wind
Janus, among its own funds and others it subadvises, is far and away the largest institutional investor in the mobile-phone titan, owning some 5% of its shares traded here and in Finland, according to
, a Web site that tracks institutional stock ownership. Janus' big bet worked out pretty well in 1998 and 1999, when Nokia's shares rose 251% and 220%, respectively, and Nokia played a big role in propelling Janus' popular stock funds to
outsize gains. In 1999, the average Janus stock fund gained more than 80%, compared with 21% for the
But on Tuesday morning
Nokia warned that slipping demand would lead to weaker second-quarter results than analysts expected. The firm's shares, already down more than 50% over the past 12 months, fell another 19%. Several popular and currently shuttered Janus funds, including
Janus Worldwide and
Janus Overseas, are sitting on big, sagging stakes, according to the most recent data on the firm's Web site.
The upshot: Funds with high-octane styles can ride home-run picks to infamy as well as fame. Even though Janus has been lightening up a bit on Nokia in recent months, because it has made such a titanic bet on the company, it can't swiftly get out of the way of a disaster.
How big is Janus' stake? Well, if we just focus on the Nokia shares traded in the U.S., Janus' 236.2 million-share balance at the end of the first quarter was almost twice that of the second-largest institutional Nokia investor,
Alliance/Equitable Investment Management
. Over the past two years, Janus peaked with 269.1 million Nokia shares on March 31, 2000, according to quarterly reports filed with regulators. That day the stock traded for $55.50, making Janus' investment worth $14.9 billion, according to Lionshares.com.
On March 31, the stock traded at $24 and Janus' 236.2 million-share investment on March was worth $5.7 billion. For a little perspective, consider that the average large-cap growth fund has $1.2 billion in total assets, according to
It's easy to see why Janus managers were eager to buy gobs of the stock as the burgeoning cell-phone business and a breathtaking amount of optimism for all things tech/telecom led to eye-popping gains. Even with its current malaise, the company's shares average a 57.6% annual gain over the past three years, compared with a 6% rise for the S&P 500.
Half the Stock It Used to Be
Still, the stock's near-term tumble, along with other Janus faves such as
, which is down more than 67% over the past year, has hurt several Janus funds. The firm, due to file a shareholder report soon, guards its funds' portfolio holdings closely, but janus.com lists six direct-sold stock funds that had Nokia among their top holdings on March 31. The list includes several funds that closed to new investors due to steep inflows, like the $19.7 billion Janus Twenty fund, the $4.5 billion Janus Olympus fund, the $27.8 billion Janus Worldwide fund and the $3.6 billion
Janus Global Technology fund. Like Nokia's shares, they boast solid gains over the past three years, but all trail their peers and are deep underwater over the past 12 months, according to Morningstar.
While Janus isn't alone in its affection for Nokia, a list of the 10 funds with the biggest bets on Nokia shares includes four with Janus managers: Janus Twenty,
WM Growth, Janus Mercury and
IDEX JCC Growth. All but one of the funds on this list, the
Hilliard Lyons Growth fund, are well behind the S&P 500's 4.5% loss so far this year -- at least partially due to their appetite for Nokia's battered stock.
It's interesting to note that not every giant fund shop is still betting on Nokia.
, the nation's biggest fund company with some $570 billion in its funds' coffers, dumped three-quarters of its Nokia shares or about 78.6 million shares in the first quarter.
In sum, Janus managers have been net sellers of Nokia for the past six months according to Lionshares.com. The problem facing Janus managers and shareholders of their funds is that just as it took months to build their bet on Nokia, it could take even longer to unwind those positions if things don't look up.
Fund Junkie runs every Monday and Wednesday, as well as occasional dispatches. Ian McDonald writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to
email@example.com, but he cannot give specific financial advice.