Comments on Enron and Janus for Investors Business Daily Article

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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