POINT: ‘VALUE,’ MY BUTT: WHO ARE FUNDS KIDDING?

Do you put any credence in the name of your mutual fund? Do you think if it is called a “value” fund it is per se buying less risky, more solid, less expensive stocks than the growth funds? Do you equate the word “value” with getting a dollar’s worth of assets for 50 cents?

Dream on. Take a look at the “largest positions of funds in Value Index” chart from a recent issue of Investor’s Business Daily. What a joke! Besides the General Res and Ford Motors are (ready for this?) Dell, America Online, Microsoft and Lucent.

What a preposterous notion of value these stocks represent. In my portfolio they are the quintessential momentum names, the stocks that are valued so highly that I fear everyday that the grim reaper will come calling. I own them precisely because of their high-growth possibilities, which are fairly recognized by the market but may be going higher anyway because of the momentum of their businesses and their excellent execution. Value, though? Give me a break.

Am I wrong? Are the value funds claiming that these stocks are exceptionally cheap on year 2007 earnings? What am I missing here? What could these managers be thinking?

I don’t want to be too cynical about this, but I think the managers aren’t thinking about anything. Mutual funds have about the worst truth-in-labeling problem I have come across in any industry. I think there should be a rule: The term value should not get applied to firms that own such high-multiple stocks. Value in this world has simply become a masquerade, a mean-spirited marketing tactic that lures people in the door who would otherwise have no desire to own such nosebleed stocks.

You will never get the Securities and Exchange Commission to bring a case against a growth manager who has hidden behind the “value” nameplate. That would be too broad. But these big mutual fund families have a responsibility to market their products responsibly.

If Dell or AOL are the largest positions in your firm’s “value” fund, could you change it? Right now? Thanks.

James J. Cramer is manager of a New York-based hedge fund and co-chairman and daily columnist of TheStreet.com, the online news service (www.thestreet.com) that first published this article. At the time of online publication, Mr. Cramer’s hedge fund was long America Online, Dell, Ford, Lucent and Microsoft, although positions can change any time. Mr. Cramer’s writings are not a solicitation for transactions and do not represent a recommendation to buy or sell stocks or derivatives .