If you love the Janus funds, make a space in your portfolio for Stilwell Financial. Stilwell is a newly public company that owns 82 percent of Janus Capital.
In recent years, Janus has had the kind of success attracting cash to its funds that Tiger Woods has enjoyed collecting endorsement money. Yet despite Janus' impressive growth, Stilwell is relatively cheap.
Investor wariness may be fueled by a bitter public dispute between the management at Janus and the leaders of Kansas City Southern Industries (which spun off Stilwell to the public in July) and the departure of James Craig, longtime manager of flagship Janus fund and the firm's chief investment officer.
In addition to its stake in Janus, Stilwell owns 86 percent of the Berger fund company, 80 percent of Nelson Money Managers and 32 percent of DST Systems, which is a transfer agent for money-management companies.
Janus, with $313 billion in assets, dwarfs Berger and Nelson. In 1999 Janus funds pulled in nearly $37 billion in new cash — more than any other fund company. The trend continued through the first half of 2000, with Janus receiving another $37 billion, far more than its rivals.
Janus people privately voiced concerns that the former KCSI executives running Stilwell might make unappealing acquisitions. And some observers raised the possibility that other marquee fund managers at Janus might split. Craig's departure did nothing to quiet those fears.
"It certainly makes an investor nervous," says Ken Charles Feinberg, co-manager of Selected American Shares fund. "At fund companies, the talent goes up and down the elevators every day, and they are clearly attractive to other fund companies and hedge funds."
That said, Stilwell shares are cheap enough to create a margin of safety, says Feinberg. How cheap? At its recent price of $44, Stilwell (SV) sells at 16 times consensus 2001 earnings estimates of $2.79 per share, according to First Call/Thomson Financial Services. By contrast, shares of T. Rowe Price (TROW, $42) sell at 18 times 2001 estimates.
Once investors become comfortable with the new Stilwell, it should trade at a higher price-earnings ratio than Price, says Feinberg. Looked at as a potential takeover target, analyst Steven Eisman of CIBC World Markets figures that Stilwell would fetch about $77 per share, based on the value of its assets.