To: marginmike who wrote (167238 ) 5/21/2002 8:23:02 PM From: patron_anejo_por_favor Respond to of 436258 Fido Magellan's Bob Stansky thinks stocks remain overvalued, expects below-average returns:marketwatch.com Market expectations low at Magellan By Justin Wiser, CBS.MarketWatch.com Last Update: 5:15 PM ET May 21, 2002 WASHINGTON (CBS.MW) -- The manager of the country's largest active mutual fund voiced low expectations for stocks in an annual report filed Tuesday with the SEC. "It's difficult to get too excited about the market in the near term," wrote Robert Stansky, manager of the $78 billion Fidelity Magellan Fund (FMAGX: news, chart, profile). "I'm looking for modest returns from stocks for a couple of reasons," Stansky continued. "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." "More optimistically, however, some of the best periods of stock market performance actually have occurred during periods of declining or sluggish earnings growth," he added. Past year Magellan lost 0.8 percent during the 12 month period ended March 31, compared to a 0.2 percent gain for the S&P 500. Tyco International (TYC: news, chart, profile) had the largest negative impact on Magellan's performance, while overweight positions in Fannie Mae (FNM: news, chart, profile) and Freddie Mac (FRE: news, chart, profile) also slowed the fund, according to the annual report. On the positive side, Stansky -- who has led Magellan since 1996 -- invested more aggressively relative to the S&P 500 in certain retailing stocks that turned in strong results recently. They included Best Buy, Staples, Office Depot, Home Depot and Target. The fund was also overweighted relative to the index in a number of media stocks, such as Viacom, Omnicom Group and Clear Channel Communications, which rose smartly over the past six months. At 20.8 percent, financials remain the fund's largest sector weighting. Citigroup (C: news, chart, profile) is the fund's largest holding at 4.5 percent of assets. General Electric (GE: news, chart, profile), Microsoft (MSFT: news, chart, profile), Viacom (VIAB: news, chart, profile) and insurer AIG (AIG: news, chart, profile) round out the fund's top five holdings.