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November 6,
2000
<IMG align=right border=0 height=37
src="http://interactive.wsj.com/media/atlas-wsjbrand.gif";
width=191>
U.S.
Stocks
There May Be No Room For Tech-Stock Rally
By E.S. BROWNING and A<FONT
size=-1>ARON LUCCHETTI <FONT
size=-1>Staff Reporters of T<FONT
size=-2>HE WALL
STREET <FONT
size=-1>JOURNAL<FONT
size=-1>
For anyone hoping to see a big technology-stock rally this
winter, there's a problem: Where's the money going to come from?
A lot of professional money managers, who sharply boosted their
tech holdings in 1998 and 1999,
are feeling these days like revelers who overdo it at Thanksgiving.
They still like tech stocks, but
own so much now that they don't have room for much more.
"We've held on to a little more than a market <FONT
color=#660000>weighting in <FONT
color=#660000>tech all the way through," says Richard
Sichel, chief investment officer at Philadelphia Trust Co. By that,
he means that he has 34% or 35% of his funds in <FONT
color=#660000>tech stocks, at a time when the Standard
& Poor's 500-stock index is about 30% <FONT
color=#660000>tech. His <FONT
color=#660000>tech holdings have shrunk little from the
36% level they hit in the spring. Much as he likes the sector, he
says, "we aren't anticipating any big shifts."
Mutual-fund manager Ed Jamieson, who had 58% of his $15 billion
<A
href="http://interactive.wsj.com/inap-bin/bb?sym=fsgrx&page=9";
target=_top>Franklin Small Cap Growth Fund in <FONT
color=#660000>tech stocks in the spring, has seen that
fall a bit -- partly because tech-stock prices have fallen. But he
still has more than half the fund's assets in <FONT
color=#660000>tech, and there is a limit to how much he
can go beyond that.
"I wouldn't say anybody is going to be making a big land grab in
technology," Mr. Jamieson warns. He is nibbling at a few
Internet-company stocks these days, but not at many.
A lot of mutual-fund managers are in the same boat. Although the
Nasdaq Composite Index, laden with technology names, has lost almost
a third of its value since March 10, professional fund managers
haven't cut their tech holdings
nearly as much.<IMG align=NONE alt=abreast height=348
src="http://interactive.wsj.com/public/resources/images/abreast11052000222105.gif";
width=355>
That raises questions about how far the current tech-stock
rebound can go. Last week, the Nasdaq composite had a good week,
rallying 5% to 3451.58 after having slid 6% the week before. The Dow
Jones Industrial Average, less heavy in <FONT
color=#660000>tech, rose 2% on the week, to 10817.95.
Of course, there are some pros who have cut their <FONT
color=#660000>tech holdings and plan to buy now. And
mutual-fund investing certainly isn't the only thing that determines
stock prices. Ordinary investors remain bullish and are continuing
to buy tech stocks and to send new
money to mutual funds that invest in them, which could help fuel a
tech recovery.
But the fact that many professional money managers are so fully
invested in tech stocks could help
explain why tech rallies have
tended to fizzle this summer and autumn. Many money managers are
warning clients that, even if tech
stocks do rebound now, a recovery isn't likely to be anything close
to the 50% gain that the Nasdaq staged last year from mid-October
through year end.
At the end of March, mutual funds that specialize in "growth"
stocks -- stocks with the fastest-growing <FONT
color=#660000>sales and profits -- held 44% of their
assets in tech stocks, according
to Morningstar Inc., which tracks mutual-fund holdings. By the end
of September that had fallen, but only to 39%.
Rather than cut their tech
holdings outright, Morningstar says, many mutual-fund managers
simply rotated away from riskier holdings, such as Internet stocks,
and toward companies with real earnings, such as fiber-optics
concerns. That leaves them little room to boost their overall
tech exposure the way they did in
past years.
Chris Bonavico, a portfolio manager at Transamerica Investment
Management and a long-term bull on the <FONT
color=#660000>tech sector, says he has been buying
tech only when he has other shares
to sell. He recently bought shares of <A
href="http://interactive.wsj.com/inap-bin/bb?sym=insp&page=15";
target=_top>InfoSpace and <A
href="http://interactive.wsj.com/inap-bin/bb?sym=saws&page=15";
target=_top>Sawtek, but sold <A
href="http://interactive.wsj.com/inap-bin/bb?sym=csco&page=15";
target=_top>Cisco Systems.
C. Beth Cotner, head of large-capitalization growth stocks at
Putnam Investments, says: "Because we're fully invested, the
question to ask when looking to buy a new stock is: What will we
sell to buy it?"
Some money managers who cut back on <FONT
color=#660000>tech earlier this year, with a plan to buy
again later, already have finished most of their buying. Lisa Costa,
a technology bull at American Express Financial Advisors, has
rebuilt her tech exposure to about
57% from about 50% earlier this summer, with purchases of <A
href="http://interactive.wsj.com/inap-bin/bb?sym=jdsu&page=15";
target=_top>JDS Uniphase, <A
href="http://interactive.wsj.com/inap-bin/bb?sym=scmr&page=15";
target=_top>Sycamore Networks and <A
href="http://interactive.wsj.com/inap-bin/bb?sym=vrts&page=15";
target=_top>Veritas Software. Howard Ward, manager of Gabelli
Growth Fund, bought shares of <A
href="http://interactive.wsj.com/inap-bin/bb?sym=intc&page=15";
target=_top>Intel, <A
href="http://interactive.wsj.com/inap-bin/bb?sym=nt&page=15";
target=_top>Nortel, <A
href="http://interactive.wsj.com/inap-bin/bb?sym=tlab&page=15";
target=_top>Tellabs, <A
href="http://interactive.wsj.com/inap-bin/bb?sym=adi&page=15";
target=_top>Analog Devices, <A
href="http://interactive.wsj.com/inap-bin/bb?sym=txn&page=15";
target=_top>Texas Instruments, <A
href="http://interactive.wsj.com/inap-bin/bb?sym=mot&page=15";
target=_top>Motorola and <A
href="http://interactive.wsj.com/inap-bin/bb?sym=qcom&page=15";
target=_top>Qualcomm, moving one percentage point away from his
maximum tech allocation.
Some professional investors say they still plan to boost their
tech holdings. Terence McLaughlin,
managing director at New York money-management group Ashland
Management, cut his tech exposure
to less than 30% of his holdings, and could imagine boosting that to
40%. "Looking long-term you can't not expose your portfolio to
technology," he says. Bob Bissell, president of Wells Capital
Management, says he has "room to take it up 10% or 20% from
here."
George Cohen, of New York money-management group Cohen
Klingenstein & Marks, unloaded stocks such as Cisco Systems
earlier in the year. "Now we think there are opportunities," he
says.
Other investors are ready to shift money from areas that have
shown big gains this year, such as biotechnology, oil-service and
natural gas stocks, and put some of that money into <FONT
color=#660000>tech, says Gary Campbell, chief investment
officer at Commerce Funds, a unit of Commerce Bank in St. Louis.
But so far, whenever a buying trend has developed, investors have
stepped forward who still have more <FONT
color=#660000>tech stocks than they need. They have taken
advantage of price increases to unload those excess holdings,
helping to kill repeated rallies.
Even investors who expect to do some tech-stock buying say they
aren't likely to boost their holdings the way they did in 1998 and
1999. Tim Morris, chief investment officer at Bessemer Trust, had as
much as 55% of his portfolio in <FONT
color=#660000>tech and communications services stocks at
the end of March, he says. He has cut that to 29%. But he doesn't
see it going back up as high as it was.
"That was a mania," he says. "It was lovely when it lasted," but
"it would be unrealistic to expect that we would see those stocks at
the same stratospheric levels that we saw early in 2000."
The impetus for any tech
recovery is more likely to come from ordinary investors than from
the pros. "The real storehouse in buying power is in the hands of
investors in money market funds," that is, ordinary people who have
put money into cash instead of putting it into stocks, says James
Weiss, chief investment officer for stocks at State Street Research
in Boston.
Data from the Investment Company Institute, a mutual-fund
industry association, indicate that, after funneling large amounts
of money into money-market funds since last year, people began
pulling it out in September, apparently using some to buy
stocks.
Ordinary investors still are eager to invest in technology
stocks, despite their declines. In September, Banc One Investment
Advisors in Columbus, Ohio, created a fund that invests only in
tech companies. Since then, the
$50 million fund has been taking in steady inflows of around
$500,000 a week, says Michael Weiner, a Banc One portfolio
manager.
"During this period of heavy volatility, technology still seems
to be what people want," Mr. Weiner says. "People still are pouring
money into there."
-- Robert O'Brien
------------------------------------------------------<FONT
size=-1>
November 17, 2000
Money &
Investing
Janus Keeps Tech StocksDespite Industry Slump
By AARON LUCCHETTI
Staff Reporter of T<FONT
size=-2>HE WALL <FONT
size=-1>STREET J<FONT
size=-2>OURNAL
Janus Capital Corp., the Denver
mutual-fund company that rode fast-growing technology companies to huge
gains in the 1990s, hasn't lost the faith.
The fund firm, with about $300 billion under management, is holding
strong to its big commitment to technology investing, despite the
harrowing drop in many tech-related issues since March, according to
Janus's latest list of stock holdings filed with the Securities and
Exchange Commission this week.
An analysis of the Janus holdings by
fund-tracker Morningstar Inc. shows that <FONT
color=#660000>Janus funds had 47.3% of their combined assets
invested in technology stocks as of Sept. 30, up from 46.7% at the end of
June. During the quarter, Janus bulked
up on its stakes in some of its largest tech-stock holdings, including <A
href="http://interactive.wsj.com/inap-bin/bb?sym=CSCO&page=15";
target=_top>Cisco Systems Inc., <A
href="http://interactive.wsj.com/inap-bin/bb?sym=EXDS&page=15";
target=_top>Exodus Communications Inc., <A
href="http://interactive.wsj.com/inap-bin/bb?sym=nok&page=15";
target=_top>Nokia Corp. <A
href="http://interactive.wsj.com/inap-bin/bb?sym=jdsu&page=15";
target=_top>JDS Uniphase Corp. and <A
href="http://interactive.wsj.com/inap-bin/bb?sym=nt&page=15";
target=_top>Nortel Networks Corp.
But while Janus expanded its holdings
in some technology stocks, it sharply reduced its holdings in others,
including some issues tied closely to personal computers. According to the
filing, Janus sold its 12.6 million
shares of <A
href="http://interactive.wsj.com/inap-bin/bb?sym=dell&page=15";
target=_top>Dell Computer Corp. that were valued at about $620 million
at the end of the second quarter. The firm also reduced its allocation to
software giant <A
href="http://interactive.wsj.com/inap-bin/bb?sym=msft&page=15";
target=_top>Microsoft Corp. to 12 million shares from 20.6 million
shares and its position in <A
href="http://interactive.wsj.com/inap-bin/bb?sym=intc&page=15";
target=_top>Intel Corp. to 1.1 million shares from a split-adjusted
1.3 million shares at the end of the second quarter.
While Janus, the nation's
fifth-largest fund company in terms of assets under management, hasn't
performed well in 2000, with investment returns for the vast majority of
its portfolios down for the year, its managers have established stellar
long-term track records, thanks to their big gains in the 1990s. Because
the company likes to take large, concentrated positions in fast-growing
companies, shifts in its portfolios are watched closely by many
investors.
Separately this week, Janus's majority owner, <A
href="http://interactive.wsj.com/inap-bin/bb?sym=sv&page=15";
target=_top>Stilwell Financial Inc., said that former <FONT
color=#660000>Janus Chief Investment Officer Jim Craig received
$78 million in exchange for his small stake in the fund firm. Mr. Craig
sold his stake after departing Janus in
September to manage money for a new charitable foundation, but the amount
he received hadn't been disclosed previously.
As Mr. Craig was preparing to leave <FONT
color=#660000>Janus during the third quarter, the fund firm
made some aggressive purchases in financial-services companies, buying
about $1.1 billion in shares of <A
href="http://interactive.wsj.com/inap-bin/bb?sym=gs&page=15";
target=_top>Goldman Sachs Group Inc., $32.7 million in <A
href="http://interactive.wsj.com/inap-bin/bb?sym=jpm&page=15";
target=_top>J.P. Morgan & Co., and $32.1 million in insurance
broker <A
href="http://interactive.wsj.com/inap-bin/bb?sym=MMC&page=15";
target=_top>Marsh & McLennan Cos. All three were new positions in
Janus-managed mutual funds and private accounts.
Janus maintained large positions in
<A href="http://interactive.wsj.com/inap-bin/bb?sym=mer&page=15";
target=_top>Merrill Lynch & Co, and <A
href="http://interactive.wsj.com/inap-bin/bb?sym=sch&page=15";
target=_top>Charles Schwab Corp., and its overall weighting in
financial stocks increased to 7.3% from 6% at the end of the second
quarter, according to Morningstar.
Janus managers were also shopping for
some retailing stocks, boosting retail stocks to about 3.1% of assets from
2.5%, according to the Morningstar analysis. <A
href="http://interactive.wsj.com/inap-bin/bb?sym=gps&page=15";
target=_top>Gap Inc., which sells the type of casual clothing that
Janus managers prefer in the office,
soared in Janus portfolios to 63.7
million shares from 11.3 million shares at the end of the second
quarter.
Janus bulked up on airplane maker <A
href="http://interactive.wsj.com/inap-bin/bb?sym=BA&page=15";
target=_top>Boeing Co., beaten down telephone-equipment stock <A
href="http://interactive.wsj.com/inap-bin/bb?sym=lu&page=15";
target=_top>Lucent Technologies Inc. and hand-held device companies <A
href="http://interactive.wsj.com/inap-bin/bb?sym=hand&page=15";
target=_top>Handspring Inc. and <A
href="http://interactive.wsj.com/inap-bin/bb?sym=palm&page=15";
target=_top>Palm Inc. during the quarter.
Like many professional investors, <FONT
color=#660000>Janus sifted through its Internet holdings in
recent months, getting rid of what it considered weaker companies and
adjusting positions in some of its other big names. The firm reduced its
stake in <A
href="http://interactive.wsj.com/inap-bin/bb?sym=yhoo&page=15";
target=_top>Yahoo! Inc. and sold a bit of its giant stake in <A
href="http://interactive.wsj.com/inap-bin/bb?sym=aol&page=15";
target=_top>America Online Inc. It added to its stakes in online
retailer <A
href="http://interactive.wsj.com/inap-bin/bb?sym=amzn&page=15";
target=_top>Amazon.com Inc. and auctioneer <A
href="http://interactive.wsj.com/inap-bin/bb?sym=ebay&page=15";
target=_top>eBay Inc.
Overall, the firm's largest holdings changed little from the second
quarter. Nokia, Cisco Systems, <A
href="http://interactive.wsj.com/inap-bin/bb?sym=twx&page=15";
target=_top>Time Warner Inc., <A
href="http://interactive.wsj.com/inap-bin/bb?sym=SUNW&page=15";
target=_top>Sun Microsystems Inc., <A
href="http://interactive.wsj.com/inap-bin/bb?sym=EMC&page=15";
target=_top>EMC Corp., <A
href="http://interactive.wsj.com/inap-bin/bb?sym=ge&page=15";
target=_top>General Electric Co., <A
href="http://interactive.wsj.com/inap-bin/bb?sym=VRSN&page=15";
target=_top>VeriSign Inc., <A
href="http://interactive.wsj.com/inap-bin/bb?sym=txn&page=15";
target=_top>Texas Instruments Inc. and <A
href="http://interactive.wsj.com/inap-bin/bb?sym=axp&page=15";
target=_top>American Express Co. remained among Janus's biggest
positions.
"I was surprised at how much stayed the same" with Janus's holdings,
said Christine Benz, an analyst with Morningstar. "Some of these stocks
endured a sell-off, and they're still standing pat," she said of <FONT
color=#660000>Janus.
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