Janus Contrarian fund manager expects oil to fall further

Wed Apr 1, 2015 2:54pm EDT
 
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By David Randall

NEW YORK, April 1 (Reuters) - Energy stocks have further to fall before they look attractive, according to a fund manager who has made his name investing in out of favor companies.

Daniel Kozlowski, portfolio manager of the $4.6 billion Janus Contrarian fund, is not adding oil-related stocks to his portfolio despite the price of crude dropping about 50 percent since last June.

The popularity of the United States Oil fund - an exchange traded fund that effectively functions as a bet that the price of oil will go higher - combined with fund managers fearing they will miss a jump in oil prices, is preventing the market from hitting its natural floor, Kozlowski said.

"There's tremendous pressure for active managers to own energy right now. That's not how bottoms typically settle," Kozlowski said.

Instead, Kozlowski is more interested in what he calls "truly out of favor" sectors, such as mining stocks.

"People are terrified of gold stocks today," he said.

Shares of Barrick Gold Corp, for example, are down 19 percent over the last six months. Shares jumped 8 percent higher in afternoon trading Wednesday, however, after a report that showed that private employers added fewer employees in the United States than economists were expecting, raising the possibility that the Federal Reserve may be cautious in tightening monetary policy.

Further consolidation in the mining industry will likely occur after years in which companies over-invested in capital spending, Kozlowski said.

Kozlowski's fund received a 2015 Lipper Award Tuesday for the best multi-care core fund for the three year period that ended in December 2014. The fund's largest holdings include airliner United Continental Holdings Inc, pharmaceutical company Endo International PLC, and generic drug maker Mallinckrodt PLC, according to Morningstar data.

The fund is up 1.1 percent for the year to date, roughly in line with the average gain among its peer group, according to Morningstar. (Editing by Grant McCool)