Comments on Enron and Janus for Investors Business Daily Article
Enron Blindsides Some Fund Groups Diversification Pays Off Janus and
Alliance were big holders on Sept. 30; Nvidia gives some relief
The collapse of energy giant Enron has left winners and losers in
its wake among fund families. One of the hardest hit was Janus
Capital. The Denver-based fund family's holdings in Enron plunged $
3.17 billion in value by the end of the third quarter vs. a year
earlier. An estimated 58% of that decline was from market
depreciation. That's based on Securities and Exchange Commission
filings compiled by Atlantic Financial, a Westboro, Mass., financial
planning firm. Janus cut its holdings by 7.7 million shares in that
period. Looked at another way, the firm reported owning 41.361
million Enron shares as of Sept. 30. Based on a closing price of
27.23, those shares were worth $ 1.126 billion.
The better news for shareholders is that the group cut its losses.
The fund family sold all of its shares after Sept. 30. "That made us
the largest seller of Enron in that period," said spokeswoman
Shelley Peterson. "We finished selling by mid-November. But we are
not disclosing the average selling price or any other particulars of
our trading." Enron closed at 40 cents a share Monday. Janus owned
5.5% of Enron's shares as of the latest reporting dates, according
to the Fidelity Investor newsletter. Alliance Capital was hit even
harder. It owned 5.7%. Alliance declined to comment on its Enron
holdings, said spokeswoman Stephanie Gia-ramita. Enron owners' loss
was a gain for other investors. "The positive side is that Enron was
replaced in the S&P 500 index by Nvidia," said James Lowell, editor
of Fidelity Investor. "Owners of Nvidia benefited mightily from
Enron's pain." The largest institutional owner of Nvidia, a maker of
computer graphics chips and software, is Fidelity Investments,
Lowell says. The Boston-based fund behemoth owned 20.16 million
shares of Nvidia, or 14.4% of its outstanding shares, as of its
latest disclosure date, Lowell says. The stake accounted for 0.2% of
Fidelity's assets.
Fidelity's Gain
How much did Fidelity's stake gain? Start with the 51.36 closing
price the day before the S&P 500 announcement on Nov. 29. Then,
they'd be worth $ 10.3 billion. At its high of 55.03 on Nov. 30,
Fidelity's position in Nvidia gained about $ 740 million in value.
Fidelity's $ 224.5 million Select Electronics, $ 11.5 billion
Fidelity Fund, $ 6.7 billion Aggressive Growth, $ 1.4 billion
Advisor Technology and $ 2.3 billion Select Technology were among
the largest 15 fund owners of Nvidia. The biggest fund owner of
Nvidia was A+ rated $ 3.1 billion Federated Kaufmann Fund, with
230,000 shares. E rated $ 842 million Rydex OTC Fund and B+ rated $
228 million Citizens Emerging Growth Fund each had 130,000 shares.
Individual funds with the largest stakes in Enron as of the funds'
latest reporting dates included $ 3.4 billion Putnam Growth
Opportunities, with 1.124 million shares. The second-largest
supporter was $ 1.4 billion John Hancock Large Cap Value, with
600,000 shares. The $ 1.6 billion American Express Mutual Fund held
278,800 shares.
Those funds are rated E, B+ and E respectively by IBD. Janus bought
1.23 million Nvidia shares in last year's third quarter, says Bruce
Fenton, president of Atlantic Financial. By the end of this year's
third quarter, Janus held 7.65 million shares, worth $ 210.1
million. Based on a share price of 27.47, those shares were worth
about 55 on Nov. 30. That would be about a doubling in value of
those shares. Janus owned another 28.29 million Nvidia convertible
bonds, worth $ 25.461 million. Fidelity's stake in Enron as of Sept.
30 was 23 million shares. "That sounds like a lot," Lowell said,
"but it's only 0.07% of FMR's total assets." The $ 73.2 billion
Fidelity Magellan had the group's largest stake. But with just 0.11%
of the fund's assets in the stock, the weighting was about the same
as Vanguard 500's. Funds like $ 7.9 billion Janus Mercury and $ 23.5
billion Janus each had about 1% of their assets in Enron, Fenton
says. Don't Sweat The Small Stakes "Usually we tell people not to
worry too, too much about this sort of thing," Fenton said. He
added, "Lots of troubling things happen in the market over time. But
they never hurt the whole market for long. And they rarely affect
individual funds for long." Enron's plight underscores a strong
point of owning diversified funds: One stock may fail, but it
usually won't drag down a fund more than 1% or 2%. The $ 14.6
billion Janus Twenty had 2.8% of its assets in Enron as of April 30.
Fund manager Scott Schoelzel says he had sold his position
completely around the time Enron Chief Executive Jeffrey Skilling
left the company in October. The share price then was in the 30s.
Copyright 2001 Investor's Business Daily, Inc.
LOAD-DATE: December 04, 2001
SECTION: A; Pg. 16
LENGTH: 778 words
BYLINE: By PAUL KATZEFF, Investor's Business Daily
December 4, 2001