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A Make-or-Break Year for Janus

The fund company needs good results when growth stocks come back.

We've had two years of feast followed by two years of famine at Janus funds. Now it's time for something in between.

I don't know what kind of market we'll see in 2002, but it seems unlikely that we'd have a third brutal year for growth stocks. It's even less likely, though, that we'll return to Internet-related speculation like we had in 1998 and 1999. Janus earned outsized returns in those years, in part, because the funds were earlier and bet more on Internet plays than the competition.

Instead, it's likely that the next few years will reward those managers who can find great stocks without getting really speculative. That was Janus' style back in the mid-1990s. Jim Craig, who managed  Janus fund  back then, was so wary of tech at that time that he owned little more than the tame service providers like EDS  and First Data .

To get back in the win column, Janus will have to repeat its mid-1990s success. It's also that mid-1990s performance that has kept most Janus funds' long-term records ahead of the pack even after two miserable years. Yet a lot has happened since then. Tom Marsico and Jim Craig are gone. Janus' funds are still weighed down by the billions of dollars that poured in in the late 1990s. Finally, Janus became much more aggressive and some funds will likely stay that way.

A third bad year, though, could sink many of those long-term records except, perhaps, those of Helen Young Hayes at  Janus Worldwide  and  Janus Overseas (JAOSX). In addition, a third bad year would mean there's more trouble at Janus than a tough market. Not to mention what it will do to investors' patience, which seems to be wearing thin already.

Last week's shakeup is proof that Janus shares that sense of urgency. Jim Goff is stepping down as manager of  Janus Enterprise (JAENX) after nine maddeningly unpredictable years. His replacement is Jonathan Coleman, who comanaged  Janus Venture (JAVTX) for three years. Goff will train analysts in his new capacity as director of research. Meanwhile, Hayes will take Jim Craig’s old post of Chief Investment Officer while retaining her managerial duties.

To gauge Janus' abilities, I’ll be watching any growth-stock rallies closely to see if Janus funds are still able to make hay while the sun shines. In addition, three of Janus' top funds must show they've still got it in 2002: Janus fund,  Janus Mercury (JAMRX), and  Janus Twenty . Those funds boast some of Janus' best managers and have great long-term records, but they've stunk of late.

Though I've lost a little enthusiasm for Janus, I still think they know how to pick growth stocks. They’ve earned about 12 more months' of slack to show they've still got it.

Etc.
For the complete story on Janus, check out our latest fund family report on the firm, which is due out later this week. The report is free to Morningstar.com's Premium Members. Not a member yet? Try it free for 30 days. 

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