Morris Smith, We Hardly Knew Ye

Morris Smith sure didn't last long as manager of the nation's largest mutual fund. After two years running Fidelity Investments' famous Magellan Fund with spectacular results, the 34-year-old investment whiz suddenly up and quit on Apr. 29.

He swears he's not burned out from his role as the single most visible portfolio manager in America. He says he's leaving for the same reason his predecessor, investment guru Peter Lynch, left in April, 1990: to spend more time with his family. "I've always had my career completely mapped out ahead of me, and now I just want to have some time for myself," Smith says. An Orthodox Jew, he will spend next year living in Israel with his wife and four children, catching up on James Michener novels. "He's my favorite writer," he says, "and I haven't had time to read a single one of his books since 1982."

SAME FORMULA. While Smith curls up with a big book, the hot seat goes to Jeff Vinik, Smith's 33-year-old successor. It took Fidelity Chairman Edward C. "Ned" Johnson III about a minute to pick Vinik for the job. Like Smith two years ago, Vinik is another little-known star in Fidelity's stable of managers. Since 1989, he has run two different funds, Contrafund and Growth & Income, producing results in the top 10% of his peer group at each one. "Vinik has had shoot-the-lights-out performance with both of his funds," says Don Phillips, publisher at mutual fund tracker Morningstar Inc.

Despite Vinik's rising-star reputation, Fidelity prepared for the possibility that investors might be heading for the exits once they knew Smith was, too. In the week before his departure was made public, Smith boosted the fund's cash position to 10%, about $2 billion, from its usual 3%, as Lynch had before he resigned.

In the end, the precaution may not have been necessary. Analysts figure that Magellan can again change managers successfully. Smith is staying until July to help Vinik get started, and Vinik says that when he takes over, he'll run the fund along the lines laid down by Smith and Lynch. "I like a bottom-up, company-by-company approach, much like Morris and Peter," he says.

Vinik has not one, but two tough acts to follow. Lynch is an investment legend, ending his 13-year career at Magellan with a 2,461% total return, vs. 508% for the Standard & Poor's 500-stock index. Since he was at it for a much shorter time, Smith's results aren't as spectacular, but they were among the best of the nation's 10 largest equity funds. From May 31, 1990, through Apr. 23, the fund's return was 28.9%, vs. 21.27% for the S&P 500. And during Smith's brief stint, Magellan's assets ballooned from $13 billion to $20 billion, well ahead of the second-largest U.S. fund, Investment Company of America, with $11.4 billion in assets.

Since he came to Fidelity, Vinik has shown a magic touch. He studied engineering and economics as an undergraduate at Duke University, then worked as a stock analyst on Wall Street before going to Harvard business school. In 1986, one year out of B-school, he joined Fidelity as manager of its Select Energy Services Fund. Within two years, he became an assistant to Lynch on the Magellan Fund. In January, 1989, he was named manager of the Contrafund, which specializes in out-of-favor stocks, and in the next two years produced a total return of 34.5%, vs. 10.2% for the S&P 500. In October, 1990, he took over the Growth & Income fund and through March, 1992, returned 55.3%. The S&P 500 rose 38.58% during that time.

While Vinik says he takes after Lynch and Smith when it comes to investing, some think he's racier. "He was too aggressive for me" running the Growth & Income fund, says Erik Kobren, who publishes a newsletter exclusively on Fidelity funds. Vinik bet heavily in narrow sectors of the economy, putting about a quarter of the fund's assets in health care and technology stocks, an unorthodox strategy for a balanced growth-and-income fund. Just the same, Kobren can't argue with Vinik's results. Morningstar's Phillips says Vinik "doesn't have a lot of patience for weak stocks" and tends to sell losers quickly. Morningstar editor John Rekenthaler, calls Vinik a "manic" trader. Indeed, the turnover rate of Fidelity Growth & Income Fund's portfolio was 215%, against an average of 85% for its peer group.

Magellan's 1 million or so investors will be watching Vinik closely. Many of them must be wondering how long he can last. Vinik says he's "in it for the long haul"--at least five years. And he says he'll continue leaving the office at 5:30 p.m., limiting workweeks to 60 to 65 hours. "My family was the first thing I thought about when I was approached about the job," he says. "I feel like I can handle it--stress is part of the job." Still, it's too bad for Vinik that Smith takes off on July 1 and not a few weeks later. Vinik's wife, Penny, is expecting baby No. 2, a boy, on July 2.

      BORN March 22, 1959, Deal, N.J.
      EDUCATION Duke University, 1981; Harvard business school, 1985
      PRIOR WORK EXPERIENCE Equity block trader, First Boston, August, 1985-May, 1986
      FIDELITY CAREER PATH Joined in 1986 as an analyst, then assisted Peter Lynch at 
      Magellan. January, 1989-September, 1990, managed the Contrafund. October, 
      1990-present, managed Growth & Income Fund
      PERSONAL Married, with one child and another on the way
Before it's here, it's on the Bloomberg Terminal.