Janus Talks! Five Managers Discuss Investing in the New Economy

The tight-lipped skippers opened up at Schwab's investor conference.
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You'll rarely find a

Janus

fund manager talking about picking stocks.

But on Tuesday, five portfolio managers from the firm gathered to do just that.

The

(JANSX)

Janus fund's Blaine Rollins, the

(JAOLX)

Olympus fund's Claire Young, David Decker of the

(JASSX)

Janus Special Situations and

(JSVAX) - Get Report

Strategic Value funds, Laurence Chang, who co-manages

(JAWWX) - Get Report

Worldwide and

(JAOSX) - Get Report

Overseas, and Marc Pinto, who manages institutional assets at the firm, gathered in Denver for

Charles Schwab's

Impact 2000 conference for investment advisers.

These five managers sat down for 90 minutes to discuss how they're coping with the Janus' explosive growth, how they feel about their shareholders and -- most importantly -- how they're investing your money.

The New Economy

Blaine Rollins, manager of the now-closed Janus fund, said investing in the New Economy means finding companies that are using technology to leverage their existing businesses and to make more money.

Rollins pointed to

GE Medical Systems

, a division of

General Electric

(GE) - Get Report

that makes diagnostic imaging equipment such as ultrasound scanners.

The division is taking the information used to sell and service its machines and putting it on the Web so it can be accessed directly by the technicians who use these devices. This makes the customers happy and frees up the salespeople, who can now spend 100% of their time selling new machines.

Dig, Dig, Dig

You've probably seen those cryptic Janus TV commercials that tout the firm's research prowess along with a few unnamed investment gems.

At the end of the ads, you want more details about how the Janus managers investigate companies. In a nutshell: They travel constantly and will go wherever necessary to learn more about a company's industry or business.

Sometimes they don't have to go far. Laurence Chang said managers recently attended a national fiber-optics conference in the firm's hometown of Denver, meeting with 50 companies in three days. Many of the companies were private, but it still gave them a good overview of the entire emerging industry.

When they visit the companies themselves, the Janus managers will meet with company executives, but they'll also talk to regular employees who can see a business improving -- or failing -- at the ground level.

Fair Disclosure = Less Disclosure?

The

Securities and Exchange Commission's

new rules on fair disclosure are meant to make information more available to individual investors and to end selective disclosure of information by corporations. Many Wall Street watchers have voiced concerns that big-name fund families such as Janus will suffer from a dearth of privileged information.

Some investment professionals have raised concerns that so-called Regulation FD will hinder their ability to effectively research companies, which will now be less open to talking.

When asked how the SEC rules will affect Janus, Rollins said that the new fair disclosure rule hasn't affected the way the Janus managers research companies, although he conceded that some companies are being noticeably quiet.

The Janus managers, he said, don't just rely on a company's management when researching a company, adding that he doesn't need to "have some CEO blow some smoke my way to keep me in the stock."

Instead, they go to a company's customers to dig up information. Rollins cited a trip to New York to meet with the biggest users of computer-storage products manufactured by firms like

EMC

. They talked to the chief technology officers at big brokerage firms and banks to find out what their spending needs might be.

Same Stocks, Different Funds

The Janus funds have gotten the reputation -- rightfully so -- for owning many of the same stocks.

Nokia

, for example, has been the

top holding of several of the family's funds. But the managers do disagree on some companies.

David Decker, as manager of the Strategic Value fund, pays close attention to the growth rate he'll get for the amount of valuation risk he must bear. He wants to provide good upside and limit the downside. With

Sun Microsystems

(SUNW) - Get Report

and its high price, Decker isn't willing to take on that risk.

Olympus fund's Claire Young, on the other hand, likes Sun and owns it. Mentioning the company's telecommunications services business, she said Janus' growth estimates for Sun are "10 to 20 percentage points higher than Wall Street's estimates."

Grappling With Growth

When asked how the firm is managing the tremendous asset growth in the funds, Rollins quickly blurted out, "We're closing them all."

Although the comment got a laugh, that's not far from the truth.

With the

closing of the $50 billion Janus fund, half of the firm's funds that are sold directly to investors are now closed to new investors. (Janus is planning to open a Janus 2.)

Continuing to build the firm's research department is key in managing this growth. Chang said that the research department has added eight more analysts this year -- young people right out of undergraduate school -- bringing the department's staff up to 50 people. Plus, the firm has enhanced its mentoring program, which is used to train these green analysts.

Euro Woes

The euro's collapse this year has definitely hurt Janus' international funds. Chang said that his funds partially hedged their currency exposure this year, but the euro's fall has hurt returns.

Managers Make Mistakes

Rollins was the manager most willing to admit his past mistakes. A bad bet on

Electronic Data Systems

(EDS)

cost him his entire bonus one year. This year Rollins' biggest mistake was

Lucent

(LU)

. It "completely hit the wall," said Rollins, calling the controls in the company "terrible" and the research and development rollout of new products "a mess."

Shareholder Loyalty

Amid their success, the Janus managers haven't forgotten about their shareholders. "I know every day who I am working for," said Young, who said she has every shareholder letter that she has ever received tacked up on her office wall.

Young was quite emotional when recalling one letter she received from a widow who could retire thanks to her investment in the Olympus fund.

The Future

It has been a big year for Janus. The firm has experienced astounding growth in its funds and some notable changes with the recent departure of Chief Investment Officer Jim Craig and the closing of several of the firm's funds. Also, performance has paled in comparison to last year's incredible returns. Rollins insisted that "Morale couldn't be better."

More importantly, these Janus managers sent the message that they're concentrating on what they know best: researching stocks.

With Janus undergoing changes and the market in choppy water, the managers made the rare public appearance to placate any lingering jitters: They're still traveling nonstop, touring company factories and talking to myriad people about the stocks they own or might own.

That has certainly worked in the past.

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deardagen@thestreet.com, and please include your full name.

Dear Dagen aims to provide general fund information. Under no circumstances does the information in this column represent a recommendation to buy or sell funds or other securities.