Investor's Business Daily, August 27th, 2007
As a bottoms-up stock picker, Minyoung Sohn believes in sticking to his investment strategy no matter the market's direction.
His fund, Janus Fundamental Equity JAEIX (formerly Janus Core Equity), is tied directly to Janus' intensive research. More than 80% of the fund's holdings are rated by Janus' in-house researchers as "buy" or "strong buy."
Sohn's conviction in his picks can be seen in the fund's annual turnover rate: a modest 46%. The fund is focused with 55 stocks.
"The key is do enough work on financials and fundamentals to have the discipline to stand with the market on a near-term basis," Sohn said.
He looks for buying opportunities in both bull and bear markets while watching out for risk.
"When stocks sell off, we have a lot of opportunity to buy or add to positions," Sohn said. "When the market has been strong or looks toppy to us, there's a great opportunity for us to reduce positions as well."
The fund was up 7.37% for the year going into Monday vs. 5.24% for large-cap blend funds tracked by Morningstar and 5.54% for the S&P 500. For the past three years, the fund produced an average annual return of 16.25% vs. 12.58% for its peers and 12.57% for the S&P 500.
Sohn stresses that the fate of his own retirement also rests in his performance as a fund manager. All of his retirement money is invested with Janus, 90% of which is in the two funds that he runs: Janus Fundamental Equity Fund and Janus Growth & Income.
Core Holdings
Despite uncertainty in the credit markets and the impact on the economy, Sohn remains certain about Fannie Mae FNM, a top 10 holding in the fund.
The government-sponsored enterprise is a big player in the secondary mortgage market. It provides funds to mortgage lenders.
Sohn believes current subprime problems will eventually turn in Fannie Mae's favor.
"We're seeing increased demand around their guaranteed fee business," Sohn said. "The company will be able to grow or retain their mortgage portfolio at more attractive spreads than before."
Fannie Mae's stock has been spared the beating seen in Countrywide Financial CFC and just about every other name in IBD's Finance-Mortgage and Related Services group. It has formed a ragged eight-week cup-with-handle base. And it's just 5% off its 52-week high.
CVS Caremark CVS is also among the top 10 holdings. The new name resulted from CVS's acquisition of Caremark Rx for $24 billion in March. Caremark provides pharmacy benefit management services to more than 2,000 health plans. It also controls a retail pharmacy network with more than 60,000 sites and 11 mail service pharmacies.
"With the acquisition of Caremark, CVS can really transform (prescription drug) delivery because they're indifferent to whether the customer gets products from the mail pharmacy or the store," Sohn said.
Sales growth ranged from 24% to 96% the past four quarters. Earnings growth was 10% to 18%.
One of Sohn's favorite companies and a new buy is high-end fashion retailer Nordstrom JWN.
"What I really like about the company is the consistency with customer service," he said. "We think the company has unique growth opportunity because they're expanding to the East Coast."
On Aug. 21, it announced it's buying back $1.5 billion of shares in the next two years. It completed a $1 billion share buyback in fiscal Q2 2007. That program started May 2006.
Second-quarter earnings topped consensus estimates by 3%. They're expected to grow between 13% and 23% the next four quarters.
Nordstrom revised fiscal '07 earnings upward after booking better-than-expected Q2 results. It lifted EPS guidance to $2.91-$2.97 from $2.81-$2.90.
