Fidelity sees $40
Intel Drop Stings Fidelity, Other Firms: Mutual Funds (Update1)
9/22/0 17:12 (New York)
Intel Drop Stings Fidelity, Other Firms: Mutual Funds (Update1)
(Rewrites headline.)
Boston, Sept. 22 (Bloomberg) -- Portfolio managers felt the
sting today as Intel Corp.'s worst-ever decline lopped $85 billion
off the market value of the world's No. 1 computer-chip maker, a
favorite of technology funds.
As of June, Boston-based Fidelity Investments, the biggest
U.S. mutual fund company, ranked as the top institutional holder
of Intel shares, according to TF/Carson Group Inc., a New York-
based research firm. Fidelity had 208.7 million shares on June 30,
24.9 million more than it had on March 31.
Hank Herrmann, chief investment officer at Waddell & Reed
Financial Inc., which holds 6.3 million Intel shares, said he has
no plans to sell at current levels.
``It's probably oversold right here,'' Herrmann said. ``It
will try to rally in here right around this price up into the area
of about 50, and will seesaw back and forth there for a while.''
Still, Herrmann believes Intel will remain under pressure,
and its price could drop to 40 by the first quarter 2001. Intel's
focus on the ``high-performance end'' of the personal computer
business has hurt it, he said.
Intel shares fell after it said yesterday that third-quarter
sales will fall short of forecasts because of weaker demand in
Europe.
Fidelity's $109.8 billion Magellan Fund, the biggest actively
managed U.S. mutual fund, bought 9.0 million Intel shares between
Sept. 30 and March 31, making it the second-biggest recent
purchaser of the Santa Clara, California-based company's stock
behind American Century Ultra Fund. American Century added 9.3
million shares between Oct. 31 and April 30, according to
TF/Carson's latest figures.
Fidelity spokesman Vin Loporchio said Fidelity has a policy
against commenting on individual stocks. American Century
spokesman Chris Doyle said its managers don't comment on stocks
that are in play.
Vanguard U.S. Growth Fund, T. Rowe Price Science & Technology
Fund and Growth Fund of America led TF/Carson's most recent list
of Intel sellers.
The Need for Speed
``The big challenge is to find applications that are going to
drive the need for much faster, more complicated processors,''
Herrmann said. ``That part of the marketplace in my opinion is not
doing what they had hoped, and until that turns around . . . their
strategy is going to be a bit confused.''
Herrmann, whose firm has 36 mutual funds totaling more than
$40 billion, expects the personal computer business to continue to
show good growth, though ``the great growth period is behind
them.''
Dennis McKechnie, manager of the $6.0 billion Pimco
Innovation Fund, had already dumped most his Intel shares a few
weeks ago, and planned to sell a sizable piece of 1.3 million
Intel shares he had left as of Friday.
``We've done fairly well avoiding the Intel bomb,'' McKechnie
said, adding that Intel represents just 1.4 percent of his
portfolio. ``We had owned as much as 3.5 percent going back just a
few months, and we've also avoided the peripheral problems.''
McKechnie recently sold his entire position in personal
computer companies, including Microsoft Corp., Dell Computer
Corp., Micron Technology Inc. and Applied Materials Inc.
Lacking a Catalyst
``Our view had been that there was no real catalyst, no real
driver for why PC sales would be better than expected, and why PC
sales would accelerate,'' the manager said. ``So we avoided a lot
of that damage.''
Business was too good for Intel back in June and July, as
parts-starved customers ordered more than they needed.
``And once they started coming out of Intel's factories,
everyone said `No, we don't really need them,''' McKechnie said.
``These types of things could take a while to work out, the full
year of 2000 could be shot at this point.''
David Brady, manager of the $1.5 billion Stein Roe Young
Investor Fund, said Intel's slide was an ``inventory correction,''
that should have limited implications for the technology market as
a whole.
``There's really no change in my estimates for growth in the
PC market in general,'' Brady said. ``I think it will grow in the
6 (percent) to 8 percent range, and checking up on Dell, and
Gateway and Compaq, I'm just not getting any indication that their
businesses are coming in below expectations as the quarter ends.''
Though Brady owns no Intel stock, he owns 600,000 shares of
Apple Computer Inc., which accounts for 2.5 percent of his
portfolio. |
