Posted by: Lauren Young on January 20, 2006
For the past decade, Fidelity Magellan was accused of being a closet index fund under the management of Bob Stansky. Now Magellan, which is Fidelity’s flagship mutual fund, has come out of the closet.
Harry Lange, who took over the fund two months ago (“Fidelity is Wild About Harry”), is making some real changes, according longtime source Robin Carpenter of Carpenter Analytix. Those changes include moving from large-cap stocks to small-cap stocks. At its peak, Magellan had more than $100 billion in assets which made it hard to buy enough small stocks to really make a difference. Today Magellan has a much smaller asset base ($51 billion), so those smaller stocks should have bigger impact, assuming they perform well.
Even so, it's usually very hard to get much bang for your buck with small-caps in such an enormous fund. The true exception is Fidelity Low-Priced Stock, which has $35 billion in assets and is the industry's largest small-company fund. I once wrote a profile of its manager Joel Tillinghast. The short story is that he is a workaholic whose main social outlet is Mensa happy hours. Oh, and he also owns more than 1,000 stocks.
As for Magellan, this week Morningstar reported that Lange boosted the fund's weighting in foreign stocks to 25%, much of it in Japanese companies such as Yahoo Japan.
Given the recent performance of the Nikkei, that's not exactly good news, but at least Lange is doing something different. Magellan needed a new look.