Like a repentant lead-foot slowed by a ream of speeding tickets, Janus managers kept mellowing out their portfolios' last quarter.

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You know the Janus story by now. The firm's managers made outsize bets on tech, media and telecom stocks to stunning gains in 1999 and record sales in 2000 -- remember that $13.5 billion stake in Nokia ( NOK) in March 2000?

Well, that was then and this is now. After seeing those prescient picks turn poisonous, Janus managers have spent the past year selling shares of their sagging tech faves and spreading the proceeds among cheaper, less racy fare such as financial stocks, pharmaceutical stocks and Philip Morris ( MO). The firm even picked up some of stodgy Warren Buffett's holding company, Berkshire Hathaway ( BRK.A).

The pasteurization kick picked up a full head of steam in the fourth quarter, when managers bid adieu to the likes of cratered data-storage shop EMC ( EMC) and hello to grocer Safeway ( SWY), according to regulatory paperwork filed Thursday night.

The upshot for Janus shareholders is that their funds are now less racy -- but also less likely to rocket north in a growth rally. For others, the take-away is that even one of the fund world's most notorious daredevils is embracing the oldest tip in the book: diversification.

Stability

"They are continuing to diversify into more stable, slower growing businesses," says Catherine Hickey, a fund analyst with Chicago research house Morningstar. "They haven't been loading up in areas like tech. If anything, they were trimming and adding money to more stable areas like financials."

A Janus spokeswoman declined to discuss the managers' moves, but the firm's shift to a more diversified and defensive stance is unmistakable. At the end of March 2000, the month when the Nasdaq Composite peaked, 12 of Janus' 15 largest firmwide holdings were in the tech, media or telecom sectors. At the end of last year, that was down to six.

Yes, longtime faves AOL Time Warner ( AOL) and Nokia were at the top of the list, but those mountainous positions have shrunk. At the end of March 2000, Janus funds owned nearly 270 million shares of Nokia, for instance, but that was down to some 164 million shares at the end of last year, according to LionShares.com, a Web site that tracks institutional stock ownership.

Similarly, data storage company EMC was a $5.3 billion position in Janus' firmwide portfolio at the end of March 2000. The position was finally liquidated last quarter.

Light Beer

Redemptions from Janus' funds, despite weak relative returns, have been light. So where have Janus managers stashed this cash? Financials, pharmaceuticals and cigarettes.

A little more than 17% of Janus funds' holdings are in financial stocks, more than any other sector. Financial giant Citigroup ( C) was an 8-million-share position when the Nasdaq peaked. At the end of last quarter, it was Janus' fourth-largest holding, with nearly 75 million shares on the books.

Berkshire Hathaway, the insurance-heavy portfolio of businesses bought by avowed technophobe Warren Buffett, was an 18,000-share position at the end of 2000. Two years later, Janus funds owned more than 400,000 shares, and the stock was among the firm's 30 biggest positions.

Among health care stocks, Janus managers have been buying shares of drugmakers Pfizer ( PFE) and Eli Lilly ( LLY) over the past two years. Both are among the firm's 20 biggest positions. Meanwhile, Janus' stake in cigarette maker Philip Morris was at nearly 3.4 million shares at the end of last year, up from some 27,000 shares just three months earlier.

Of course, the firm's portfolio isn't without its interesting quirks. While Janus managers have been buying pharmaceutical stocks, the firm's Merck ( MRK) position was liquidated. And while Janus managers told reporters that they sold the last of their Enron stake in mid-November, another firm fending off questions about its accounting, Tyco International ( TYC), was Janus' 10th-largest holding at the end of last year.

Trailblazing?

It's hard to blame Janus managers for trying to ratchet down their risks. The vast majority of the firm's funds trailed even their growth-minded peers over the past year. And these recent losses have smudged some previously sterling long-term records. The firm's ( JAENX) Enterprise and ( JAVLX) Twenty funds, for instance, are both in the red and trail more than 70% of their peers over the past one and three years, according to Morningstar. Mostly because of investment losses, the firm's assets under management have fallen from a peak of some $350 billion in 2000 to about $175 billion now, according to janus.com.

These moves have changed the way Janus' funds perform. It's unrealistic to expect them to soar with tech stocks because they are, by and large, placing smaller bets on the mercurial sector than before. The majority of the firm's funds trailed their average peer in the fourth quarter, for instance, when a tech rally lifted many growth funds that clung to sinking tech bets.

The bottom line for Janus investors is that the complexion of the firm's funds has quietly changed. For many, particularly those troubled by the depth of the past year's losses, this is probably good news. But those waiting for the funds to snap back whenever the growth style and tech sector revive are waiting for a bus that won't arrive.

The rest of us should take Janus' move as confirmation that diversification isn't a cop-out.

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 imcdonald@thestreet.com, but he cannot give specific financial advice.

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