Fidelity Contrafund also reduces its tech holdings - but adds Cisco, bringing it up among the top ten holdings:
......Fidelity Investor's Lowell noted that the shift has not been Fidelity-wide, with many funds sticking with technology. However, Will Danoff, the closely-watched manager of Contrafund, also lightened up on technology, cutting his position to 18.9% on March 31, from 26.3% on Jan. 31.
Fidelity doesn't release a full list of holdings, only the top 10. Intel and Lucent, both out of the top 10, were Magellan's fourth and eighth largest positions, respectively. America Online dropped to fourth from third. And Citigroup Inc. (C), which wasn't in the top 10, became the eighth-largest holding.
At the same time, Stansky has been increasing his weighting in energy stocks, often considered defensive. That weighting rose to 5.9% from from 4.5% at the end of January.
David O'Leary, president of Alpha Equity Research Inc., a Portsmouth, N.H., Fidelity watcher, said the weighting suggests that Stansky has been growing concerned about the high price-earnings ratios of many technology stocks. "Fidelity has always outperformed by aggressive sector rotation," O'Leary said.
Contrafund's Danoff has upped his stake in media and leisure stocks, adding Cisco Systems Inc. (CSCO), America Online and Associates First Cap Corp. (AFS) to his top 10 holdings.....
Dow Jones Newswires -- April 16, 1999
Lucent Tech No Longer In Top 10 Fidelity Magellan Hldgs
By John Hechinger and Mara Der Hovanesian
NEW YORK (Dow Jones)--The world's largest growth fund - Fidelity Investments' $90.7 billion Magellan Fund - is selling off technology stocks.
Portfolio Manager Robert Stansky has sliced tech stocks to 20.9% as of March 31, from 25.5% of assets as of Jan. 31, according to the Boston company's quarterly Mutual Fund Guide.
The selloff represents more than $4 billion in sales out of the technology sector for Magellan.
Most strikingly, Intel Corp. (INTC) and Lucent Technologies Inc. (LU) are no longer in the top 10 holdings.
Jim Lowell, editor of the Fidelity Investor, which tracks Fidelity funds, says it also looks like Stansky is trimming back on America Online Inc. (AOL).
"Stansky is probably one of the most adroit buyers and sellers of tech stocks on the street," says Lowell.
"He's been able to maneuver through the thick and thin of technology's turbulent waters to the shareholders' benefit," Lowell says. "He's been not just a good buyer - and that hasn't been hard - it's selling, too. It's how you maneuver on the sell side that can help or hinder dramatically."
Lowell says it's the first sign that Stansky is "getting cautious" about the stock market. "He's taking his foot off the gas," he says.
Stansky's move to concentrate the portfolio to 334 stocks from 523 earlier in 1998 is partially to credit for the fund's 1998 performance. He has since cut back to 318 stocks, according to the quarterly guide.
But many credit Stansky's shuffling of his technology position as the core driver of last year's growth.
The Magellan fund is up 7.39% year-to-date, compared with its large-cap peer group, which has gained 3.39% for the year, according to Chicago fund tracker Morningstar Inc.
The fund's trailing one-year return is 25.63%, compared with 12.16% for the category.
More of Fidelity Investment's domestic equity mutual funds are beating the key Standard & Poor's 500 Index: 54 out of 163 funds, including sector funds, beat the S&P in 1998. Year to date through March, 78 out of 168 beat the S&P, according to Morningstar.
Morningstar reports that, on average, the Fidelity domestic equity funds have performed better than their peers, ranking roughly in the top third year to date.
The decision to cut back on technology marks a significant shift for fund manager Stansky, who achieved market-beating performance over the last year - in part because of his decision to load up on technology when the market dipped last fall.
Fidelity watchers said this move suggests that Stansky has become nervous about the high valuations of some technology stocks and has been positioning the fund more defensively. Stansky's moves are watched closely because of the size and potential impact of his fund on U.S. markets.
Fidelity Investor's Lowell noted that the shift has not been Fidelity-wide, with many funds sticking with technology. However, Will Danoff, the closely-watched manager of Contrafund, also lightened up on technology, cutting his position to 18.9% on March 31, from 26.3% on Jan. 31.
Fidelity doesn't release a full list of holdings, only the top 10. Intel and Lucent, both out of the top 10, were Magellan's fourth and eighth largest positions, respectively. America Online dropped to fourth from third. And Citigroup Inc. (C), which wasn't in the top 10, became the eighth-largest holding.
At the same time, Stansky has been increasing his weighting in energy stocks, often considered defensive. That weighting rose to 5.9% from from 4.5% at the end of January.
David O'Leary, president of Alpha Equity Research Inc., a Portsmouth, N.H., Fidelity watcher, said the weighting suggests that Stansky has been growing concerned about the high price-earnings ratios of many technology stocks. "Fidelity has always outperformed by aggressive sector rotation," O'Leary said.
Contrafund's Danoff has upped his stake in media and leisure stocks, adding Cisco Systems Inc. (CSCO), America Online and Associates First Cap Corp. (AFS) to his top 10 holdings.
Contrafund has gained 5.79% year to date, compared with 3.39% for the category. The fund's one-year trailing return is 23.96%, outpacing the 12.16% return for the average large blend fund.
New stocks in Magellan's top 10 holdings include Citigroup and Time Warner Inc. (TWX).
A lot more of Fidelity's mutual funds, including Contrafund and Magellan, increased their growth profile last year, according to Morningstar analyst Scott Cooley. That has prolonged, in particular, Stansky's winning streak against the S&P: he delivered a 33.6% total return in 1998, more than five percentage points ahead of the S&P 500's gain. He has been beating the S&P for the past five quarters, a turnaround after three years of trailing the index.
"Fidelity made a huge shift, and they got that one right," Cooley says. "We'll see if the next shift works as well.
Cooley also says, "It probably makes sense that Danoff and Stansky are taking money off the table since tech stocks have had such a fantastic run."
The outstanding question is whether these portfolio changes foreshadow even greater changes, or just indicate that the managers are exercising "some fairly modest profit taking," Cooley says.
Continued improved performance will further cement Fidelity's No. 1 position going forward, says Fidelity Monitor newsletter editor Jack Bowers of Rocklin, Calif.
An increase in money market flows over last year reported by the Investment Company Institute, and the Vanguard Group's gain in assets pose problems, Bowers says. But he thinks Fidelity funds are poised to gain new visibility among mutual fund investors.
(Malvern, Pa.-based Vanguard had a record $4.64 billion three-month influx of new cash in the first quarter of 1999, and the Vanguard 500 Index Fund, which mimics the S&P Index 500, continues to gain ground on Magellan. Magellan pulled in $1 billion in the first quarter.)
"Vanguard is stealing the show when it comes to new money," said Bowers. "(But) bringing in new money is no longer a major part of the game. They'll bring up existing assets by performance."
Donald R. Dion Jr., publisher of the Fidelity Independent Adviser Newsletter in Williamstown, Mass., agrees. He expects "money will flow into Magellan at an accelerate rate."
"It won't be long before it's $100 billion. All they need is a couple of good days," Dion says.
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