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A World of Differences : Janus' Hayes Sees Opportunity in Changes in Europe, Other Regions

December 31, 1996

Helen Young Hayes, the daughter of a retired physics professor, has achieved some critical mass of her own in the investment world, guiding Janus Worldwide to the best five-year performance of any mutual fund in the world-stock and global category tracked by Morningstar Inc. of Chicago.

Hayes, 34, was born in Berkeley, grew up in Starkville, Miss., earned an economics degree from Yale and cut her stock-picking teeth at Fred Alger Management before joining Janus Capital Management of Denver in 1987. Hayes, a triathlete who's fluent in Mandarin Chinese, took over at the helm of Janus Worldwide in 1992. She also runs Janus Overseas, a younger, smaller sibling fund that invests almost exclusively in foreign issues.

Hayes was interviewed by Russ Wiles, a financial writer based in Phoenix.

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Times: The U.S. stock market obviously has benefited from a tail wind recently. Do you expect that wind to change direction at all, perhaps favoring some of the foreign markets?

Hayes: Our economic expansion has been running much longer than the recoveries in Japan and Europe, which are still bumping along the bottom of the recent recession. From that simple perspective, I would expect that foreign markets, from where they are in the economic cycle, will operate within a better macroeconomic environment in the future.

Times: Recognizing that you take a bottom-up approach, focusing mainly on individual companies, are there any foreign nations or regions that you favor at the moment?

Hayes: The largest part of both portfolios is invested in Europe. In Europe, of course, you have many individual companies, and each of those is sliced up into hundreds if not thousands of different investment opportunities. But there do seem to be some tendencies or trends within Europe that are generating this big percentage of ideas for me.

Times: Such as?

Hayes: First, there is a dramatic restructuring effort such as we saw here in the U.S. in the 1980s. The wave is just now starting. It's very exciting.

Second, there is a trend toward an increasing emphasis on shareholder value. This has been part of the U.S. culture for decades, especially during the '80s and '90s. We don't have that some phenomenon occurring in Europe on a wide scale yet, but things are changing.

For example, [until recently] there had been no common German phrase for "shareholder value." Whenever German managers would refer to it, they'd switch to English. Major German companies like Hoechst, a pharmaceutical-chemical company, suddenly have totally reoriented the way they do business. Previously, Hoechst had a multifaceted mission statement. The company wanted to be a responsible citizen, gain market share, get big and so on. Now, it's focusing on just one single thing: shareholder value. The shareholder-value phenomenon is dramatically changing the way managers view their companies in Europe. I own Hoechst and still like it very much.

Another, similar, trend has seen more Europeans invest in the stock market. Roughly 5% of the German population invests in equities--a very low percentage compared to Americans. But that's increasing dramatically, with the percentage of German wealth in mutual funds having doubled in the past five years.

Finally, there are other particular trends in Europe that are driving the fundamentals of some of the companies I own. One is an information-technology boom. This same trend has catapulted the earnings of U.S. companies for 16 or 17 years, but it's just now becoming a focus in Europe. Another is a trend toward outsourcing. Put them all together and you see why Europe looks so good.

Times: Besides Hoechst, what other European holdings exemplify what you seek in a company?

Hayes: Hoechst is attractive because it is restructuring and because of management efforts to increase the return on invested capital, earnings growth and the profitability of the company.

Then there are Ciba-Geigy and Sandoz, two Swiss stocks that I own [the two companies are about to merge]. These are fairly similar companies to Hoechst in that they are pharmaceutical-chemical conglomerates. The reason I own both is that they are participating in another trend in Europe called intelligent merger-and-acquisition activity. The pharmaceutical industry is undergoing rapid consolidation, as is the chemical industry. This is something we have experienced in the U.S. over the past decade, but it's just beginning to hit Europe.

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