The Chart du Jour
Subscribers may remember the chart above of Stilwell Financial that we published in our January 21, 2001 article "Portfolio from Hell: Janus Dissected". At the time we commented about Stilwell (and the Janus Funds under its umbrella):
One can't of course go short a mutual fund itself. Maybe certain of you may get involved selling short a few of these stocks, but another way to play the composite picture here, is to sell the Janus Fund concept itself by selling Stilwell Financial (SV - p/e 21) - a holding company that among other businesses owns 82.5% of Janus Capital. Stilwell announced on January 2nd that total assets under management had fallen to $260 billion as of December 31, 2000 compared to an average level of $302 for the total year 2000. Some of this can obviously be attributed to performance, but maybe a few disappointed folks are slowly heading to the door. Certainly few are aggressively adding to this fund manager as they did once upon a time. Janus's glory days are likely over.Well, not to toot our own horn too much, we note today that Stilwell has almost halved since our comments, and assets under management are now down to $183 billion, or a full 36.6% lower than a year ago. The stock dropped a further $2 Wednesday as the company frantically issued a 30-year zero coupon convertible bond in order to buy out 600,000 shares of Janus from Janus Chairman Thomas Bailey. Bailey is now cashing out half of his 6% long holding in the fund manager.
Stilwell, with a book value of just $3.66 a share currently pays a trivial dividend compared to some of its mutual fund competitors, and yet trades at a generally higher price multiple. Management does not have a high percentage ownership of the company, and a number of directors have recently been doing some minor insider selling.
The chart pattern is a sloppy, volatile, mess so this is not for the feint of heart, but SV is likely a stock headed lower over time. This will occur as the lightbulb slowly turns on (in other words, the realization sets in) across American households that these guys are investing their money in a cavalier and dangerous manner, and that what used to work in the go-go up-move, is unlikely to work well much longer.
Stilwell, through its actions, is of course just adding more long-term leverage on top of an already soured investment management philosophy. Its stock price pattern above still looks highly suspect. But having made almost 100% on our prior short suggestion in three months time, maybe we should use the current plunge in this stock to book out some profits (if not done already), looking to reload and reshort later on.
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