The Stocks that Derailed the Janus Express

Why did America's hottest fund family cool off?

It's not exactly a secret that Janus' performance has turned down this year. So far in 2000, most of its domestic-stock funds are in the bottom half of their respective categories. Indeed, many of the funds have posted year-to-date losses, including Janus Venture (JAVTX), down more than 30% through October 6, and Janus Twenty , which has lost more than 10%.

Janus put up terrific gains over the years, particularly in 1998 and 1999, by making fairly large bets on fast-growing companies, especially in the technology sector. Those emphases on high growth rates, technology, and large individual holdings have come back to haunt the firm so far in 2000. In particular, the Net-stock and wireless slumps have hit Janus hard.

Here's a look at five of the stocks that have taken the biggest toll on Janus' returns.

Nokia (NOK) was the firm's largest holding when 2000 dawned, representing about 5% of Janus' stock-fund assets. Nokia got clocked this summer when it announced that its operating margins would fall during the third quarter. Morningstar.com analyst Todd Bernier points out that Nokia's margin problems result in part, at least, from short-term seasonal problems, but the market has pushed down the company's shares by more than 20% this year.

Comcast  was in Janus' top 10 at year-end, and it was still one of the firm's 15-largest holdings in June. Comcast's shares roared ahead in 1998 and 1999; the company's aggressive broadband strategy struck a chord with investors. But with interest rates rising in 2000 and investors cooling to even backdoor Internet plays, the company's shares have shed 15% of their value.

AT&T Liberty Media  has been another big stinker for Janus. The baby of cable mogul John Malone, Liberty had soared in recent years, in part because investors thought it was positioned to benefit from the exponential growth of the Internet. Most of the Janus domestic-stock funds owned it in December 1999 and on June 30, 2000. That stock has lost more than one third of its value this year.

Sprint (PCS Group)  has been another of the firm's biggest clunkers. Like a lot of wireless stocks, it soared in 1999, but slowing subscriber growth has taken a toll in 2000, and the stock is now down more than 30% for the year.

Finally, Vodafone Airtouch (VOD) has also detracted from the Janus funds' returns this year. High fees for wireless licenses in Europe have made investors skittish, and the stock has lost more than 20% this year. As of June 30, the stock was the Janus funds' eighth-largest holding.

Is it time to give up on Janus? Nope. The firm has seen performance dry spells before. In 1997, for example, the last time the technology sector lagged the broad market, several Janus funds, including Mercury (JAMRX), registered uninspiring returns.

Moreover, it's worth keeping in mind that many of 2000's worst-performing stocks have been great holdings for Janus over the long haul.

But Janus' experience this year shows that trees really don't grow to the sky. Any consistently applied strategy is bound to produce periods of weak relative returns. Janus' problems this year are not reasons to sell, but they provide further evidence that investors need to develop more-realistic expectations about the firm's performance.