Fidelity Magellan Halved Tech Holdings In Just One Month Manager Adeptly Redeployed Into More Conservative Stocks

Jeff Vinik, the closely watched manager of Fidelity Magellan, the nation’s biggest mutual fund, sold off nearly half his investment in technology companies in November and adopted a less-aggressive overall market position, according to a report released Thursday by Fidelity Investments.

Having accumulated his technology position gradually, Vinik in one month cut his fund’s exposure to technology stocks by about $10 billion, from 43 percent of Magellan’s holdings to 24.5 percent.

His technology holdings probably have declined even further since November, according to filings made by Fidelity to the Securities and Exchange Commission this week about more recent sales.

Other Fidelity funds also reduced their technology commitments, Fidelity said Thursday.

The announcement of the selling by Vinik, and by Fidelity in general, is notable because Vinik had been more closely associated with the 1995 bull market in tech stocks than any other investment manager.

Analysts said the selling also explains why technology stocks have been so weak in November and December.

“The breakdown in technology stocks began around November, just about the time Fidelity was selling,” said Robert MacLellan, technology analyst at Dillon Read & Co. “Mutual funds had carried the tech market. Fidelity and others can make or break certain stocks.”

The Fidelity announcement confirms what many on Wall Street have suspected since early December - that while Vinik was publicly bullish on high-tech stocks, he was quietly selling.

“It was no great surprise,” said one analyst who tracks Fidelity stock trading. “Vinik knew he had to unload technology, it was way overweighted and had made a killing. It was time to get out.”

The first clear sign that Vinik and Fidelity were cooling on tech stocks came in December when confidential trading information obtained by The Washington Post showed that in October and November, they sold off almost all of their multibillion-dollar investments in several semiconductor stocks.

Wall Street was impressed this week by Vinik’s ability and willingness to move quickly out of huge positions. One investor compared the speed and size of his move with the aggressive trading associated with master speculator George Soros.

“Soros moves currencies in that size, but to do it in stocks, a far smaller market - wow,” said Michael Harkins, a partner at the investment firm Levy, Harkins & Co.

Magellan and other Fidelity funds appear to have headed for the exits ahead of similarly aggressive stock mutual funds.

While Magellan’s performance has been weak of late - it is down about 3 percent so far this year - other technology-laden funds such as Twentieth Century Ultra, which is down about 9 percent, have done even worse.

Technology stocks that Vinik dropped out of Magellan’s top 10 holdings were Hewlett-Packard Co., IBM Corp., Micron Technology Inc., Cisco Systems Inc. and Nokia Ab.

Having raised $10 billion in cash, Vinik redeployed the money rather conservatively. Stocks, which had accounted for 96 percent of Magellan’s portfolio, declined to 82 percent. His largest single position was in Standard & Poor’s 500 stock futures, essentially a proxy for big capitalization stocks.

Vinik’s biggest new bet was on interest rates. He bought about $5 billion in U.S. Treasury bonds and notes. According to a Fidelity spokeswoman, this is in line with Vinik’s view that interest rates are heading lower.

In addition, Vinik put $2 billion in short-term money-market instruments.

Analysts warned against basing investment decisions on this information, which is 6 weeks old.

“It is amazing how short term fund managers’ outlook has become,” said Phil Erlanger. a market analyst based in Acton, Mass. “Five weeks is an eternity. Positions could easily have changed.”

Nonetheless, Erlanger believes Vinik was wise to lighten up when he did. “What we are seeing in technology stocks is not a correction,” he said. “It is a B-E-A-R market.

“You will not see a bottom to the bear market until everyone hates technology stocks, and we are not there yet.”