Fidelity Magellan Sells Some Tyco, Adds Some Tech
By Dan Culloton
Morningstar.com
Tuesday May 21, 5:05 pm Eastern Time
Fidelity Magellan (Nasdaq: FMAGX - News) manager Robert Stansky sold a significant number of his Tyco International (NYSE: TYC - News) shares earlier this year, according to the fund's annual report. Stansky also lightened his load of big pharmaceutical stocks and added to some bellwether technology names, according to the report that Fidelity released on Tuesday.
Tyco has inflicted the most pain on the world's second-largest mutual fund, which has lost 15.6% over the last 12 months and trails both the average large-cap blend fund and the S&P 500 over the trailing-12-month and year-to-date periods. The company "suffered greatly during the period from concerns about its accounting practices in the wake of the Enron collapse, its high debt load, and a restructuring plan to divide the company that took investors by surprise," Stansky said in the report.
At the end of last year Tyco was still one of Stansky's top five holdings. He has since cut back on that wager, though, selling about 6.5 million shares between the end of last September and March 31 of this year, according to the annual report. At the end of the first quarter, Tyco was still in the portfolio but no longer among Magellan's top 10 holdings.
Stansky also trimmed his positions in big drugmakers since his fund's semiannual report. He shed big slugs of Eli Lilly (NYSE: LLY - News), Merck (NYSE: MRK - News), and Schering-Plough (NYSE: SGP - News). He also sold some Pfizer (NYSE: PFE - News) shares, but the stock remains one of Stansky's top holdings. Overall, Stansky reduced the fund's health-care weighting by about three percentage points in the six months covered by the report. "But the benefits of being underweighted in health care were outweighed by the weak performance of some of the fund's investments in pharmaceutical stocks," Stansky said. "While some of the fund's health-care services stocks such as United Health Group (NYSE: UNH - News) were strong performers, several of the big drug companies such as Bristol-Myers Squibb (NYSE: BMY - News), Merck, and Schering-Plough suffered from disappointing earnings."
Magellan still contained less technology than the S&P 500 at the end of the first quarter, and although he has made some recent tech purchases, Stansky remains cautious about the sector. Stansky said companies wouldn't have a good idea of what they plan to spend on technology for the rest of this year and next year until the end of June. "At that time, I should have a better idea of when a recovery in business prospects might occur and how to position the fund accordingly," Stansky said. Despite his uncertainty about tech's near-term prospects, he bought about 6.5 million shares of networking giant Cisco Systems (Nasdaq: CSCO - News) between September 30, 2001, and March 31, 2002, and added more than 1 million and 2 million shares, respectively, to his Microsoft (Nasdaq: MSFT - News) and Intel (Nasdaq: INTC - News) holdings during the period.
Overall, Stansky has sober expectations for the stock market. "It's difficult to get too excited about the market in the near term," he said. "I'm looking for modest returns from stocks for a couple of reasons. First, valuations are still historically high. Second, it continues to appear to me as if earnings growth will be somewhat subdued as we continue the economic recovery." |
