The latest portfolio reports from
tells us that even the tech and telecom sector's most ardent fans have lost that loving feeling for the battered sector.
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Lessons From the Fall: A Special Fund Junkie Report
After riding highflying tech stocks to a stunning average 80% gain in 1999 and record inflows in 2000, Janus' stock funds have cratered with the
Nasdaq -- falling 31.3% on average over the past 12 months and slipping into net outflows, with eight of its funds shuttered to new investors. Consequently, the April 30 semiannual shareholder report filed with regulators Thursday -- no rush, folks -- shows that the Denver firm's managers are spreading the money among other sectors and seeking refuge in cash.
Some will cheer these moves as a nod to risk control, but others will rightly counter that the moves are a bit late. No matter how you feel about the moves, it makes sense to check them out because 4 million investors own Janus funds, which still have some $230 billion in their coffers.
we noted that regulatory filings showed that Janus managers were, in sum, reducing their stakes in tech stocks, including bellwethers like networker
and data storage concern
. The Janus shareholder report further illustrates its managers' tech exodus.
"As it turned out, the decline in the
stock market was led by many of the names in which we invest -- fast-growing companies that were, and still are, the leaders in their respective industries. As the economy slowed dramatically, demand for their products and services eroded almost overnight, as did their stock prices," the firm's Investment Committee writes in a letter to shareholders. "With that said, we're refocusing our efforts on positioning our portfolios for what we think lies ahead."
And in positioning their portfolios, it hardly seems as if they see bonny days ahead for tech stocks. Of the 16 direct-sold Janus funds in the report that were around six months earlier, just three --
Special Situations and
Strategic Value -- had a higher tech bet on April 30 than they did six months earlier.
The tech-laden Nasdaq Composite fell 37% in the six months ending April 30, so the tech sector's collapse no doubt played a role in whittling these funds' tech stakes. That said, many funds were clearly selling tech shares.
The shuttered small-cap
Janus Venture fund and the young, all-cap
Janus Orion fund, for instance, both had more the 40% of their money in tech stocks at the end of October. But by the end of April, the funds' respective managers, Will Bales and Ron Sachs, had slashed their tech stakes down to 21.2% and 26.6%, according to
Jim Goff, manager of the
Janus Enterprise fund, cut his fund's tech position from 38.1% to 18.1% in the six months ending April 30. At the same time Helen Young Hayes and Laurence Chang, co-managers of the closed
Janus Worldwide fund, more than halved their fund's tech stake, which fell from 32.2% to 14.4%.
While some funds were buying enough tech to raise their positions during the sector's fall, it wasn't an effort to build an outsize position. Two of the funds buying tech were the growth shop's value-oriented funds, which were probably hunting for bargains in the Nasdaq dustbin: the Special Situations and Strategic Value funds run by David Decker.
In the six months ending April 30, the Special Situations fund's tech position rose form 22.8% to 25.3%, while the Strategic Value fund's stake rose from 14.3% to 15.6%.
Judging from their tech selling in the first quarter, the tech positions Janus managers reduced the most included fallen-angel networkers like
, in addition to long-time fave and wireless titan,
. The only tech sector where Janus managers raised their exposure was semiconductors, where their favorite cumulative pick was
Where did they put the money they raised selling tech shares?
Well, judging from the new names among various Janus funds' top-10 holdings, it's an eclectic range of stocks. Karen Reidy added energy concerns
, in addition to insurer
Marsh & McLennan
. At the same time financial dynamo
turned up in the
Olympus and Special Situations funds' top 10.
One particularly troubling fact is that it looks as if many managers didn't see anything they liked at all, choosing to keep money on the sidelines rather than commit it to stocks. Considering that the Nasdaq Composite jumped 15% in April, this indicates Janus managers aren't seeing great things down the road for the mercurial sector.
The average stock fund has 5.5% of its money in cash, according to the
Investment Company Institute
, the fund industry's biggest trade group. And at the end of April, 12 of the 17 Janus funds were carrying more cash than that. The closed
Twenty, Olympus and
Global Life Sciences funds all had more than 15% of their money in cash at the end of April, according to the firm's shareholder report.
While the redemptions from Janus funds outpaced investments by $4.4 billion through April 30, some of the cash cushion might be there to cash out rattled investors. Then again, there's probably no more negative comment on tech stocks' prospects than Mike Lu's nearly 25% cash position at the end of the Nasdaq's best April ever.
The bottom line is that Janus managers are shifting gears a bit, now that the Nasdaq's siren song hasn't been heard in quite some time. If the managers are wrong, the danger for shareholders is that the growth fund they bought for tech exposure ends up elsewhere when the sector starts trudging north again.
The danger for tech fans is that the Janus managers might be right.
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.