What is Jeff Vinik up to?
June 2, 1999
Vinik Is Again Selling Stakes in Technology
By RICHARD A. OPPEL JR.
<Picture: J>effrey Vinik made a famous market call in November 1995 while still the manager of Fidelity Magellan, the world's biggest mutual fund: He bailed out of $10 billion worth of technology stocks.
Unfortunately, he put much of that money into cash and bonds, and Magellan's value barely budged over the next six months while the broad market soared. Vinik left Fidelity, an FMR Corp. unit, soon after, set up a hedge fund for rich investors and has since turned in a striking performance, tripling his investors' money in less than three years.
Now Vinik has reduced his technology holdings once again, according to federal securities filings.
In the first three months of this year, his firm, Vinik Asset Management in Boston, sold stakes in chip makers and other computer-equipment manufacturers, among other technology businesses. The fund, which manages about $2.5 billion, eliminated its entire $95 million stake in Intel Corp., $88 million worth of stock in Flextronics International Ltd., $105 million of Electronics for Imaging Inc., $96 million in Compaq Computer, $101 million in the American depository receipts of Nokia, the Finnish cellular phone maker, and most of its $132 million stake in Maxtor, which makes disk-drive storage products.
In all, Vinik's hedge fund sold more than $3 billion of U.S. stocks in the quarter, a fact reported Tuesday by Bloomberg News. The firm listed $817.2 million in domestic stocks as of March 31, down from $3.9 billion at the end of 1998.
But while Vinik's moves are closely watched by some investors because of his reputation as a stock picker, the latest report may not reflect a negative turn in his market sentiment. One investor knowledgeable about Vinik's portfolio said it would be a mistake to conclude that he has turned bearish on the stock market.
The sales could have been offset by a reduction in short positions, or bets against stocks -- positions that he is not required to report. He could also have bought stock-index futures, options, derivatives or foreign stocks -- none of which has to be reported.
Officials at Vinik Asset Management declined to comment on the stock sales or on the fund's allocations.
And much could have changed. The securities filings list his domestic stock holdings as of two months ago, and Vinik has been a frenetic trader who moves in and out of positions quickly.
At Magellan, he loaded up on high-technology stocks, with this concentration reaching its peak in April 1995. Then, that November, he cut technology stocks to 24.5 percent of the fund, a sharp decline from 43.2 percent a month earlier. That amounted to billions of dollars of stock sales in just weeks.
He has continued his hyperactive style of trading. At the end of last year, he owned $64 million worth of Rational Software Corp., then sold the entire stake by the end of March. So far this quarter, he has bought about $170 million of the stock.
Still, "his portfolio was very slanted to technology, and now he's lightened up that portion of it," said Fred Hult, a research analyst at the Carson Group of New York, which tracks institutional holdings of stock for investment banks and corporate clients. "Definitely, technology was at the top of the list" of stocks that Vinik sold in the first quarter, he said.
Vinik's hedge fund eked out a 1 percent return for investors in the first quarter of this year, a disappointing performance after two outstanding years. His investors reaped a 45 percent gain in 1998 and 77 percent in 1997. |
