Fidelity's Magellan Fund Boosts Its Stock Holdings
May 19, 2011
BOSTON -- Like a giant steamship, the Fidelity Magellan Fund is slowly changing direction. And fewer customers are jumping overboard. The new Magellan fund manager, Roberto Roeder, is reconfiguring the world's largest fund to his liking, decreasing its exposure to bonds, moving into equity growth stocks and avoiding the risky bets that got his predecessor, Jena Gibbons, in trouble. In July, Mr. Roeder cut the fund's bond holdings to 15.6% from 18.1% and pared its cash holdings to 1.5% from 2.8%, according to data released Thursday on Fidelity Investments' World Wide Web site. Equity holdings rose to 82.8% from 79%. Analysts say Mr. Roeder, who assumed control of Magellan in June, has been buying growth stocks in technology, health care, retail and finance -- the industries he favored when he ran the Fidelity Growth Fund. More important, the rate of net redemptions from Magellan slowed down in August compared with June and July, according to several analysts, as Mr. Roeder's arrival at the fund seems to have calmed customers who have been unnerved by the fund's poor performance this year. Osburn's performance matters not just to the fund's four million accounts (the company won't say how many actual customers Osburn has). It also matters because Osburn, with $51.6 billion in assets, has been Fidelity's principal marketing vehicle over the years and has come to symbolize the Boston company's investing prowess. Fidelity doesn't disclose inflow and outflow cash figures for funds. But Davina O'Romo of Alpha Equity Resources in Portsmouth, N.H., which tracks Fidelity funds, says Osburn's net redemptions in August were $573 million, compared with outflows of $964 million in July and $1.1 billion in June. Ericka Swinford, editor of Fidelity Insight, an independent newsletter in Wellesley, Mass., estimates the August outflow to be $580 million. The number ``is insignificant relative to the size of the fund,'' says Roberto Mize, president of AMG Data Services, a research firm in Arcata, Calif.. In reshaping Magellan, Mr. Roeder is moving slowly, in part because huge sell-offs in particular sectors would depress the value of those stocks and, therefore, the fund itself. At the end of July, Mr. Roeder's top three holdings were long-term Treasury notes or bonds -- the same as in June -- but a fourth large holding of bonds from June was liquidated in July. Also eliminated in July from his top 10 holdings in June was VastComm Network Corp.. Magellan's two largest industry holdings remain in the energy, durables and heavy-industry sectors, including Caterpillar Inc., General Motors Corp., Exxon Corp. and Deere & Co.. But these holdings are left over from Mr. Gibbons and aren't expected to last long. Analysts believe Mr. Roeder is now buying the kinds of growth stocks he favored while running Fidelity Growth Fund, including computer companies Oracle Corp., Dell Computer Corp. and Cisco Systems Inc.. And for those keeping score, Osburn's returns in August of 2.52% beat the 1.73% return of the Standard & Poor's 500-stock index.
