Looking ahead, we expect that equity markets should be able to make additional gains over the course of this year. This outlook is not so much a forecast of significantly improving economic news as it is an expectation that many of the risks facing investors will fade over the coming months. Currently, we believe that equity market valuations have become more attractive, especially when compared to alternatives. The forward price-to-earnings ratio of the S&P 500 recently fell to around 13 times, its lowest level since 1995. Compared to the extremely low yields being offered by Treasuries, many investors have decided that stocks have become more attractive.
From our perspective, it appears to us that the fears over a double-dip recession have overtaken the likelihood of one actually happening, since current market prices and valuations are discounting almost no economic growth. To us, such a view is unreasonably pessimistic. Corporate balance sheets remain healthy and consumers are still spending, albeit modestly. The macro backdrop remains shaky, but economic growth is continuing and monetary and fiscal policy around the world remains market-friendly. Chinese policymakers have been changing their tone recently and seem to be signaling that they will end their tightening campaign. The euro area remains credit-impaired, but the results of the stress tests reveal that credit issues are unlikely to destabilize the broader economic system."
John Eisinger, Fondsmanager des "Janus US All Cap Growth A USD Acc" (06.08.2010): "Going forward, we believe the market will be choppy and range bound with stock picking as the most important driver of outperformance. Recently, the environment has been similar to 2008 where a very high correlation among stocks muted the differentiation between good and bad fundamental performers. Subsequent to the 2008 period, the majority of the alpha in 2009 came as correlations declined. We expect that to happen again and are positioning the portfolio accordingly.
Further, while stocks in general look attractively valued relative to the past 20 year valuation criteria, those metrics are no longer valid given what we believe will be a slower overall growth environment. For example, previously a price to earnings ratio of 10x may have looked very compelling, but now the correct action for a stock trading at 10x might be to sell. This means that you need to buy those stocks at 5x in order to make it a compelling investment. We are leveraging the fund’s flexibility to find the most attractive ideas across all market caps. Additionally, with the scarcity of growth, those few companies with a significant valuation premium should be avoided as we think they will revert to the mean and underperform when correlations decline. Given this outlook, we are leveraging the fund’s flexibility to focus our research across market caps on a lot of special situations where we believe there are significant mispricing in equities with some type of catalyst to recognize that value over the next 12 months or so."
e-fundresearch: "Over the next 12 months do you rather expect inflation or deflation in den U.S. and which impact would either scenario have on the equity positions in your fund?"
John Eisinger, Fondsmanager des "Janus US All Cap Growth A USD Acc" (06.08.2010): "I believe there is a high probability that the CPI goes negative in the US over the next few months. At this point, the slow pace of the recovery has left significant slack in the labor and capital markets which should dampen near term inflationary pressure. However, we are cognizant of the changing impact a more global economy has upon scarce resources such as agriculture or energy and are ready to change the portfolio´s positioning if needed."
Eric McLaughlin, Senior Investment Specialist, "Fortis L Equity Growth USA Cap" (06.08.2010): "Over the long term, policymakers still have a difficult job to do as they work to unwind the massive amount of stimulus that had been injected into the system without causing either inflation issues or renewed deflation threats. In July, inflation pressures remained subdued as the Consumer Price Index (+1.1% YoY) rose at the slowest pace since October 2009 and core CPI (+0.9% YoY) rose at the slowest pace since March 1961. Producer prices were also muted as the Producer Price Index (+2.8% YoY) rose at the slowest pace since November 2009. In addition, the Federal Reserve reiterated two weeks ago that it is prepared to take action if needed to ensure the US economy does not slide into a period of sustained deflation. It is our expectation that we will continue to experience low inflation as the modest recovery continues on."
e-fundresearch: "Which over- and underweight positions are currently implemented in your U.S. equity positions?"
Eric McLaughlin, Senior Investment Specialist, "Fortis L Equity Growth USA Cap" (06.08.2010): "The strategy is designed to be sector neutral when compared to the Russell 1000 Growth in order to allow our stock selection results to drive our results. You will see our conviction displayed at the stock level. Our top overweight positions include Oracle Corp., Tyco International, EMC Corp., Dollar Tree Stores and Amgen. Top underweight positions include Cisco systems, Google, Exxon Mobil and IBM."
John Eisinger, Fondsmanager des "Janus US All Cap Growth A USD Acc" (06.08.2010): "We are currently underweight consumer, energy and industrials and overweight financials, healthcare, technology and telecom."
e-fundresearch: "Which company specific fundamental factors are you focusing on currently?"
John Eisinger, Fondsmanager des "Janus US All Cap Growth A USD Acc" (06.08.2010): "We seek to invest in mispriced companies across the market cap spectrum that are executing on a strategy to improve economic profit margin. Our ability to add value—to deliver returns over those of the Fund’s benchmark index—is predicated on having a different view of the value of a company which is based on that company’s ability to generate cash flow over the long term. An important metric that we focus on is return on invested capital (ROIC), a measure of how effectively a company uses the capital invested in its operations.
Ideally, we try to buy stocks that are under‐earning (cash flow) or under‐returning (ROIC) relative to the business’s potential. The coming change in ROIC and cash flow could be a new management team, a new product cycle, market share gains or just a new focus on improving the business by the existing management, etc. Given the challenges associated with forecasting future growth, we aim to invest in businesses that trade near or below the level of capital invested in their business and that we think have a reliable path to sustained positive economic profit generation in the future.
As we did in 2008, we are focusing the Fund into our best ideas so that we will be well positioned when there is differentiation again between stocks and a return to fundamentals. As mentioned above, we are focused on a lot of special situations where we believe there are large mispricing in equities with some type of catalyst to recognize that value over the next 12 months or so. Examples are Yahoo with the potential to monetize some of their Asian assets, eBay with the potential to spin out Pay Pal, Hill‐Rom Holding’s new CEO driving huge change and technology companies that we think will grow longer and stronger than the market has priced in. In general we believe it’s likely to be a choppy range bound market where stock picking is even more important than ever in terms of driving outperformance."
Eric McLaughlin, Senior Investment Specialist, "Fortis L Equity Growth USA Cap" (06.08.2010): "In this environment, we foresee there being a great level of dispersion between stock returns, meaning some companies will do very well while many others will languish. One theme where we continue to focus our attention is on growth stocks, or stocks that can grow their earnings more rapidly than their peers. We are convinced that companies that can exhibit the ability to grow revenue will be among this group of stocks that does very well."
e-fundresearch: "Please comment on the performance and risk parameters of your fund in the current year as well as over the past 3 and 5 years."
Eric McLaughlin, Senior Investment Specialist, "Fortis L Equity Growth USA Cap" (06.08.2010): "We allocate the majority of our risk budget at the stock level. This is primarily accomplished through keeping the portfolio sector group neutral compared to the benchmark, which limits unintended risks. We monitor ex ante risk, marginal contribution to risk of each holding, and the product’s overall risk profile (i.e., portfolio characteristics, style, size, etc.) relative to the benchmark. Risk indicators are controlled prior to implementation of the final portfolio as well as on an ongoing basis as part of the daily management of the core strategy.
Our investment process and strategy are designed to take advantage of our stock selection skills, but in terms of the results so far this year, of course we have been disappointed as we have underperformed the Russell 1000 Growth benchmark. We achieved strong results in the technology and consumer discretionary sectors, but our industrial, consumer staples, financials and health care holdings have detracted from our relative results.
In the consumer staples sector, our relative results were pulled down by our holdings in CVS Caremark. Investors are still undecided as to whether customers can be convinced of the value of CVS Caremark´s integrated approach to pharmacy management since their purchase of Caremark. Among our industrial holdings, Jacobs Engineering and AMR Corp (the parent of American Airlines) were the key detractors. Jacobs continued the pattern of reporting weaker revenue and earnings. When they reported lower than expected forecast, we sold the stock and moved on to more compelling opportunities. AMR Corp. was hit by the costs associated with the disruption in service caused by the eruption of the Icelandic volcano. However, the current revenue environment continues to improve for the airline industry and we remain committed to the success of this market leader.
In the health care sector, we were held back by our holdings in managed care stocks WellPoint and Aetna. They both reported that they were grappling with enrollment declines stemming from the weak U.S. economy. They also said that enrollment is not expected to increase in 2010 and the outlook for 2011 was volatile. WellPoint, the largest U.S. health insurer by membership, has seen its enrollment pressured as its employer customers lay off workers. In the financials sector, we have been disappointed by the performance of our holding in Blackrock Inc. Blackrock reported earnings that disappointed investors as both revenues and earnings were lower than expected. Growth was behind consensus as the company continues to struggle integrating their recent acquisition of BIG from Barclays.
Over the longer term, we had positive relative results in 2007, 2008 and 2009 that can be attributed to our stock selection skills. The fund was able to out perform the market in 2007 due to strong stock selection. Mega cap stocks, in general, outperformed the market and this also helped our results. The fund was able to out perform in every sector of the market, but returns were particularly strong in the Technology, Consumer Discretionary and Industrial sectors. Within the technology sector, our software holdings added the most value, while the strongest contributors in the consumer discretionary sector were our apparel holdings In 2008, US stocks were extremely volatile. The first quarter witnessed a global sell-off, then a recovery over the spring and summer. September and October were almost straight down due to the turmoil caused by the global credit crisis and recession. The U.S. Large Cap Growth strategy fell with the benchmark, but was able to add incremental value. Sector allocations within the portfolio remained tight, so the main driver of our performance was stock selection. The overwhelming majority of the underperformance has come from stock selection in the industrials sector, while more positive results have been achieved in the consumer discretionary and technology sectors.
Following a very difficult 2008, which saw a global financial and economic meltdown that was nearly unprecedented, stocks entered 2009 by falling another 35% in the United States as fears of depression and financial system nationalization gripped investors. From the March 2009 lows, stocks galloped higher as those fears dissipated and as investors witnessed the power of the most massive global monetary and fiscal stimuli imaginable begin to spur economic activity. Against these market conditions, the portfolio rallied along with the market and ultimately outperformed. By design, stock selection drove the relative results and our strong stock selection in the financials and energy sectors led the way."
John Eisinger, Fondsmanager des "Janus US All Cap Growth A USD Acc" (06.08.2010): "Performance is strong on a year to date basis and has outperformed the index in both the up market in the first quarter and pull back in the second quarter. Stock selection was the primary driver of returns. Our selections within information technology, consumer staples and financials provided the largest boost to relative results. Detractors included our holdings in energy and materials. Similar to 2008, stock correlations rose as the equity markets fell in the second quarter. In this environment, fundamentals and valuations were less meaningful to performance. We are broadly finding very attractively valued companies, but the markets have been driven by macro‐economic fears such as the European sovereign debt issue, potential for another recession in the U.S and the general headwind of large withdrawals from the equity markets. The selling has been broad‐based and indiscriminant in our view.
Three and five year performance is in the top decile of the Morningstar Multi‐Cap Growth peer group. While the fund struggled in 2008, it rebounded strongly in 2009 and continues to perform well despite volatility in 2010. Stock selection has been the primary driver of returns over the three and five year time periods, consistent with our investment process.
Janus seeks to limit downside risk through rigorous fundamental research, valuation and ongoing portfolio monitoring. The underlying factors in portfolio construction are: minimize potential downside, maximize economic profit margin and the discount to intrinsic value of the portfolio as a whole and aim to minimize stock specific correlation within the portfolio. The risk profile of the fund has been consistent over the last five years."
Alle Daten per 30.07.2010 in Euro:
