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Strategies & Market Trends : The Amateur Traders Corner -- Ignore unavailable to you. Want to Upgrade?

To: Brandon Buttons who wrote (9738)	5/23/2001 11:54:45 AM
From: Tom Hua	Respond to of 19633

May 23, 2001 Fidelity Magellan Fund Slashes Tech Holdings By John Hechinger Staff Reporter of The Wall Street Journal BOSTON -- Fidelity Investments' $87 billion Magellan Fund has slashed holdings of fallen technology and Internet stars, but could end up buying in the tech sector again this year if manager Robert Stansky sees evidence of business improvement. Those disclosures, contained in Fidelity Magellan Fund's annual report filed with the Securities and Exchange Commission, were accompanied by a brief commentary in which Mr. Stansky described himself as "optimistic" about the stock market. But the Magellan manager also said he regretted that he didn't move more into utilities and other defensive stocks that might have improved his investment loss of 24.2% in the fund's year ended March 31. Overall, the percentage of Magellan invested in information-technology stocks fell to 11.6% as of March 31 from 28.5% six months before. At the same time, Mr. Stansky bet more heavily on financial stocks, including new holdings First Union Corp., Goldman Sachs Group Inc. and Merrill Lynch & Co. He also added health-care holdings, such as biotech leader Amgen Inc. During the second half of the year ended March 31, Mr. Stansky sold a third of his shares of Cisco Systems Inc. and more than half his holdings of data-storage leader EMC Corp., which dropped out of the fund's top 10 holdings. He also unloaded many of the speculative Internet-related holdings he had scooped up more than a year ago near the height of the Web craze, and purged many of what he described as "early-stage tech companies," such as business-to-business marketplace-software firm Ariba Inc. and Phone.com Inc., whose values have been decimated in the Net rout. "Looking ahead, I'm trying to analyze how long the soft demand for tech products will last," said Mr. Stansky. The Magellan manager said he sold off the larger technology stocks because he felt they couldn't sustain their dazzling growth rates. And he said the contraction in the capital markets hit the smaller companies -- such as his bets on once highfliers Redback Networks Inc. and Juniper Networks Inc. -- harder than he had expected. He still holds positions in those companies -- though he scaled back sharply his bet on Juniper. Mr. Stansky makes few public comments, and investors watch his moves closely because of the size of his fund -- second only to Vanguard 500 Index Fund -- and its impact on markets. In addition, Mr. Stansky has proved a shrewd technology investor, buying heavily at the end of 1998 and 1999, when tech shares swooned, and profiting from their rebound. As a result, Mr. Stansky, who is credited with turning around the performance of the huge fund, has an enviable three-year record -- an annualized return of 9.2% through Monday -- 2.3 percentage points better than the Standard & Poor's 500-stock index and in the top 20% of similar managers, according to tracker Morningstar Inc. Along with fund shareholders, closely held Fidelity Investments profits from that record, because the No. 1 mutual-fund company gets a higher management fee if Magellan's three-year record beats the S&P 500's performance -- and a lower fee if it falls short. So even though the holdings of Magellan shareholders shrank 2.5 percentage points more than the decline in the S&P 500 index for the year ended March 31, Magellan's three-year record still beat the S&P. As a result, Fidelity's report disclosed that it collected a management fee from Magellan shareholders of $710.3 million in the year ended March 31, up 28% from $554 million the year before. Out of the most recent fee, a huge $139.2 million came from a bonus for topping the S&P 500 -- the first annual bonus since the 1996 fiscal year. In the year ending March 2000, Fidelity had to give up $11.2 million in fees because of underperformance; the year before that, $119 million.