The stock holdings of Fidelity Investments, the nation's largest mutual-fund company, are closely watched by some Wall Street pros as a guide to where to invest. But Fidelity's guidance on tech stocks is becoming a jumble of divergent views. Fund managers are all over the map on tech stocks, with some taking sharply different approaches. "I haven't seen this much disagreement among Fidelity managers in years," says James Lowell, editor of the Fidelity Investor newsletter.
The company disclosed new data on Apr. 17 on fund holdings indicating that some managers of Fidelity's big growth funds have turned deeply bearish on tech stocks. Most either trimmed or sharply reduced their tech holdings in February and March.
Even so, a large number of Fidelity growth fund managers are still maintaining technology as their largest sector bet. One fund manager made a big contrarian bet, loading up on tech in February and March -- a gamble that the worst of the industry's woes is over.
CISCO SKID. Robert Stansky, manager of the $80 billion Magellan fund, is more bearish on tech than he has been in years. He cut Magellan's technology stake from 28% last January to 19% on Jan. 31. But as of Mar. 31, he had sliced his tech holdings to 11.6%. That's the most underweighted Magellan has been in tech at least since Stansky became Magellan's manager in 1996. His benchmark, the Standard & Poor's 500-stock index, had a 17.7% weighting in tech on Mar. 31. Many fund managers try to beat market indexes by underweighting or overweighting sectors in comparison to their weighting in the S&P 500 index.
Stansky put nearly half of Magellan's assets into just three sectors: financial, consumer, and health-care stocks. His largest holdings include Citigroup (C), Home Depot (HD), and Pfizer (PFE). Cisco (CSCO), a longtime top-10 holding for Magellan, is no longer among the fund's largest. Microsoft (MSFT) is the only tech stock among Magellan's top 10 stocks.
Fidelity's $34 billion Contrafund has also made a dramatic shift out of tech. In February and March, manager Wil Danoff cut his tech holdings to just 2.5% of assets from 10.2% at the beginning of 2001. He also boosted his cash position to 11%.
Other Fidelity funds that sharply cut their tech holdings include the Mid-Cap Stock fund, also with 2.5% in tech, Asset Manager Growth fund, with 8.9%, and the Disciplined Equity Fund, with a 13.8% tech weighting. Dividend Growth Fund, which had nearly 20% of its assets in tech at the beginning of 2001, cut its stake to 16.4%, leaving the sector slightly underweighted.
LONELY BULL. Other large Fidelity funds maintained overweighted positions in tech. Contrafund 2, in contrast to its near-identical twin, the Contrafund, held on to a 21.6% tech weighting on Mar. 31, down from 24.6% on Feb. 28. The Blue Chip Growth, Large Cap Stock, and Growth Company funds all remained tech believers, with tech their largest holdings.
One manager diverged sharply from the pack. Harry Lange, who runs the $2.5 billion Capital Appreciation Fund, backed up the truck on tech stocks, boosting his weighting to 47.3% in March, from 27% in February. Among his big holdings are AT&T (T), Nokia (NOK), Dell Computer (DELL), and sizable stakes in semiconductor stocks.
Fidelity managers may not always agree. But with funds taking polar opposite approaches to the market, chances are good that while some funds make the wrong bet, others will be stars that outperform the rest. It's also getting harder and harder for individual investors to figure out which way this market is headed. By Geoff Smith in Boston