Magellan Fund Returns to Growth Stocks

In his first two months as manager of Fidelity Investments’ Magellan Fund, Robert Stansky has returned the $54-billion mutual fund to traditional growth stocks and shed defensive positions, analysts said Monday.

The former manager of Fidelity’s Growth Company Fund sold off part of Magellan’s 19.3% stake in bonds and reallocated part of its 8.5% stake in cash in favor of growth stocks in the technology, finance, retail and health sectors, analysts said.

Fidelity will release its monthly fund guide later this week, which will show how Stansky changed Magellan in June, his first month as manager and the most recent date for which figures are available.

“He’s in the process of getting the portfolio 90% to 95% invested in common stocks,” said David O’Leary, president of Portsmouth, N.H.-based Alpha Equity Research. “I think he will make Magellan look like the Growth Company [Fund] by the end of the third quarter.”

Stansky, who took over Magellan from Jeffrey Vinik after Vinik resigned suddenly in late May, managed a 16.11% average annual return, compared with 12.93% for the Standard & Poor’s 500 during his nine years as manager of the Growth Company Fund.

At the end of May, Stansky had 23.2% of the assets of the Growth Company Fund invested in technology stocks, 11.4% in health care, 10.8% in finance and 10.1% in retail and wholesale companies.

Conversely, Vinik had 2.6% of Magellan assets invested in technology, no assets invested in health care, 5.8% in finance and 3.6% in retail. His top holdings were Treasury bonds and in defensive stocks in the energy, durables and industrial machinery and equipment sectors.

Stansky had 86% of the Growth Company Fund invested in stocks; Vinik had 72.2% of Magellan in stocks.

Vinik, who had a 17.33% average annual return during his four years at Magellan, compared with 16.62% for the S&P; 500, was known for making big bets on specific sectors and trying to time the market.