Magellan Head Lauded, Dumped Stocks
Jeffrey Vinik, the influential manager of Fidelity Magellan, the largest U.S. stock mutual fund, has been publicly bullish on one of his big technology holdings, Micron Technology Inc., but has been quietly selling most of his stake in the company, according to confidential Fidelity trading data obtained by The Washington Post.
In October and November, Vinik sold most of his shares in communications and electronics giant Motorola Inc. and three of the biggest semiconductor makers, Micron, National Semiconductor Corp. and Alliance Semiconductor Corp.
Motorola and Boise-based Micron were the third- and fourth-largest holdings in Fidelity Magellan’s $53 billion portfolio at the end of September.
In a third-quarter report that Fidelity Magellan began mailing to shareholders in early November, when some of Vinik’s heaviest selling was occurring, he said he still liked semiconductor stocks. He specifically mentioned Micron, which he called “still relatively cheap.”
Vinik declined a request to comment. Jane Jamison, chief spokeswoman for Fidelity Investments, said, “Jeff’s report was a review of Magellan’s performance during the prior six months. He was interviewed in early October. What he said represented his views at the time. The fund’s holdings are always changing.”
Securities law prohibits manipulation of stock prices, but it is unclear whether these provisions would be applied to a fund manager who said one thing in public while doing something else in private, according to a Securities and Exchange Commission official.
“It depends on the facts of each case,” said the official, who was not speaking with knowledge of Fidelity Magellan’s trading. “If the seller was a large shareholder and owned a significant position in a company and put out a positive statement about his investment to protect his position, that might rise to level of market manipulation. Is it a set of facts that would peak the curiosity of an SEC examiner? Probably. Is it manipulation? That is unclear.”
Vinik’s moves are watched by many investors because he has been so successful and his trading can move the market. Fidelity Magellan has returned 38 percent to investors this year, compared with 32 percent for the Standard & Poor’s 500 index, largely as a result of Vinik’s big bet on technology stocks.
During the time Vinik was cashing out of these companies, their stock prices crumbled. Micron, for example, fell 40 percent between Oct. 1 and Nov. 20.
“Everyone (on Wall Street) is obsessed because they know that if they are on the wrong side of Fidelity, they are going to get hurt. If they are on the right side, they are going to get helped,” said David J. O’Leary, president of Alpha Equity Research Inc., a research firm in Portsmouth, N.H.
In early October, Vinik told USA Today that he was still a bull, and said about his technology holdings, “The stocks are up but so are the fundamentals. It’s very unlikely that I’d wake up one morning and decide to dump technology.”
But rumors Vinik was selling technology stocks persisted. And Magellan’s liquidation of 78 percent of its $934 million Micron holdings between Oct. 1 and the first week in November helped drive the stock price from $79.38 a share to $48.88.