Magellan Fund sold off tech stocks before slide Fidelity guide confirms a move to cash position

January 12, 1996|By BLOOMBERG BUSINESS NEWS

BOSTON -- Jeffrey Vinik, manager of Fidelity Magellan Fund, sold off an estimated $10 billion worth of technology stocks in November, dropping the fund's holdings of those stocks to 24.5 percent from 43.2 percent, beating declines in the shares over the past six weeks.

Instead, Mr. Vinik began moving money into Treasury securities, according to a mutual-fund guide released last month by Fidelity Investments.

The $53.7 billion Magellan Fund, the world's largest mutual fund, also held a large amount of Standard & Poor's 500 stock index futures at the end of November.

"That Magellan sold about $10 billion worth of tech stocks in November is amazing," said William Daugherty, president of Kanon Bloch Carre, a retirement plan consulting firm in Boston, referring to the magnitude of the sales in the course of one month.

Mr. Vinik has replaced technology stocks on the list of his fund's top 10 holdings with big investments in securities, such as 10-year and 30-year Treasury securities and S&P 500 futures, according to Fidelity's mutual-fund guide.

Magellan lifted its holdings of bonds to 11.6 percent on Nov. 30 from 1.5 percent on Oct. 31, and raised its cash po-sition to 6.7 percent from 2.8 percent, the highest level in more than a year, according to Fidelity's monthly mutual-fund guide.

The fund's technology stock weighting may even be lower now, based on reports filed this week with the Securities and Exchange Commission that said Fidelity unloaded more shares of technology stocks, such as Cisco Systems Inc.

Cisco Systems was among the Magellan Fund's top 10 holdings on Oct. 31, according to Fidelity's fund guide published last month.

But Fidelity didn't include Cisco Systems on the list of the Magellan Fund's largest investments as of Nov. 30.

Hewlett-Packard Co., IBM Corp., Micron Technology Inc. and Nokia AB also weren't on the top 10 list on Nov. 30. They were Oct. 31.

The only technology stock to be included among the fund's biggest holdings Nov. 30 was Oracle Corp.

Tracking the Magellan Fund's investments can help explain why the stock market is performing the way it is.

Magellan manages twice as much money as the next biggest mutual fund, so when it sells or buys shares, the market feels the effects. The second largest mutual fund is Los Angeles-based Capital Research & Management Co.'s Investment Co. of America.

"Our best guess is about 10 percent of Magellan assets are currently invested in technology," said Eric Kobren, executive editor of Fidelity Insight, an independent newsletter that tracks Fidelity, reflecting a belief that Mr. Vinik continued to sell technology stocks in December.

Mr. Vinik's decision to reduce the fund's technology stock holdings and to buy bonds has helped shield Magellan shareholders from a recent slump in technology stocks.

Magellan has lost 3.3 percent of its value this year, or one-third what Twentieth Century Ultra Fund has fallen this year, said the research group Lipper Analytical Services Inc. The Twentieth Century fund, the nation's sixth biggest, devotes about 60 percent of its $13.3 billion in assets to technology stocks.

At the same time he was shifting his portfolio mix, Mr. Vinik was stating publicly that he believed devoting 40 percent of an investment portfolio to technology stocks was still a strategy that made sense, though he was ignoring his own advice.

Since then, Fidelity has banned its fund managers from making any comments about stocks.

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