What a difference a year makes. A year ago, Morris Smith was a 32-year-old upstart taking the helm of the world's biggest stock mutual fund, Fidelity Magellan, following the retirement of its venerated captain, Peter Lynch.
A million Magellan shareholders held their breath, deciding whether to jump ship. Pundits warned of impending stormy weather.
Guess what: This ship didn't sink after all.
Magellan, despite an 8 percent decline the first six months under Smith, has managed a solid 17 percent gain over the past 12 months. It's up 28 percent in 1991 as Smith has filled its portfolio with his own picks. Assets are sailing along at $15.6 billion, just below a $16 billion high set May 31.
"Last August, Magellan became mine with my own selections, though it had been well-positioned by Peter," related Smith, who sold about half Magellan's 1,300 stocks that month and replaced them with 250 of his own.
An interview with Smith features background chatter and repeated "time out" to respond to urgent staff investment queries. He has a portfolio of exactly 800 stocks, heavily weighted in "early" cyclical companies, finance and health care. Energy, electric utilities, food and beverages are underweighted.
Shares of Fannie Mae were kept and Philip Morris Cos. holdings were doubled. He has significant amounts of General Electric and Pfizer Inc., and has added Ford, General Motors, American Cyanamid and Microsoft Corp.
Believing retailers have turned the corner, he holds Wal-Mart Stores, Home Depot, Dayton Hudson and T.J. Maxx.
"Right now, I'm a nervous bull because we must have good earnings and a strengthening economy for stocks to perform as I'd like them to," he explained.
Running Magellan has meant longer work weeks than when Smith capably ran Fidelity's smaller OTC Portfolio. He often works 75 hours. To accomplish workdays that begin at 7:30 a.m. and may end at 12:30 a.m. the following day, Smith brings his workload home. He's home by 6:15 p.m. each night with his wife and four children, who have been quite tolerant.
"Despite added pressure and additional hours, my family has been terrific," he said. "And, since I've been so busy trying to do a good job and always put the heat on myself anyway, the pressure hasn't been all that bad."
Being more introspective and reclusive than the talkative Lynch hasn't helped. But Lynch provided encouragement.
"When the market was down, Peter gave me a paper that pointed out Magellan has always done badly in a down market, and that was of tremendous help," Smith recalled.
Smith has to deal with the same argument lodged against Magellan ever since it hit the $5 billion mark in assets -- the contention that it's simply too big.
"This thing can't move on a dime, but I don't think small or large dictates success," he said.
Smith offers this advice to mutual fund investors: "My message is not to get too focused on short-term results. Do dollar cost averaging, buying into a fund on a regular basis so you won't be hurt by excesses of the market."
He doesn't plan to abandon ship any time soon. "I am happy and enjoy being a fund manager. I couldn't endure all this if I didn't genuinely like it."