THREAD ---Dow Jones Newswires -- July 15, 1998
Magellan Cleans Cendant And Philip Morris
From Top-10 List
By Richard C. ten Wolde
NEW YORK (Dow Jones)--The mutual fund world's behemoth has moved.
Although the moves seem slight, they were enough to keep the leviathan, the
Fidelity Magellan fund, ahead of the Standard & Poor's 500-stock index for the
second quarter running.
Missing from the $75 billion fund's top-10 holdings is Cendant Corp. (CD), which got
hammered after announcing accounting irregularities in April. Philip Morris Cos.
(MO) is also gone from the top-holdings list.
It isn't clear whether those equities have been flushed entirely from the fund, for
Fidelity Investments only provides a top-ten list of holdings and will not discuss
specific companies.
Added to the top holdings were Lucent Technologies Inc. (LU) and American
International Group Inc. (AIG).
The fund was up 3.37% in the second quarter compared with a 3.3% gain - assuming
reinvested dividends - of the S&P.
American International and Lucent have been climbing this year, helping to fuel
Magellan's gains. Shares of American International have jumped about 37% this year
alone and Lucent has lifted about 27% since the stock split April 2.
Robert Stansky, who has now completed two years as manager of the fund, has
marshaled a turnaround that has lifted the fund from a laggard to a leader. After his
predecessor Jeffrey Vinik made an ill-timed bet on bonds in 1996, Stansky took
over. He muddled for a while but the last 12 months have been encouraging.
But can the improved performance stay above the index?
Russ Kinnel, equity fund editor at Morningstar Inc., the Chicago fund data firm,
doesn't think that is likely.
"It's a decent fund with decent prospects but don't expect it to have monster
returns," Kinnel said.
The fund's three-year cumulative gain is a dismal 76.45%, ranking it 347 out of 559
growth funds Lipper Analytical Services Inc. has tracked for that time period. But in
the 12-month period ended Tuesday, the fund has gained 30%, just a hair behind the
S&P's 30.26% gain with reinvested dividends.
The short spurt has lifted the fund above 73% of its peers.
Stansky has let the fund's weighting in the technology sector grow in the last year,
with 16.5% of assets in that group of stocks now, compared with 13.9% at the same
time last year. The S&P has a 15% weighting in tech stocks.
Though the fund has received a boost from financials, such as Citicorp (CCI), which
announced its planned merger with Travelers Group Inc. (TRV) in April, Stansky
hasn't added to his underweighting in the sector. The fund has 13.9% of assets in
financials compared with 18% in the S&P.
While there are minor differences between Magellan's and the S&P's weightings,
they aren't so significant that the fund will ever stray far from the index, Kinnel said.
It isn't an index fund, but the index sure plays an important role, Kinnel added. "At
the end of the day, how he does at picking the 100 largest companies will determine
his relative performance."
Though the fund has consolidated its number of holdings from 477 at the end of the
first quarter to 438 now, it still has a wide spread among the nation's largest firms.
Only the top 13 holdings represent at least 1% of assets, according to Morningstar.
Magellan's top-ten holdings as of the second-quarter's end are:
General Electric Co.
Microsoft Corp.
Wal-Mart Stores Inc.
Merck & Co.
Home Depot Inc.
Bristol-Myers Squibb Co.
Citicorp
Cisco Systems Inc.
Lucent Technologies Inc.
American International Group Inc.
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