Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Stansky's Magellan Finds Course

BOSTON -- A year after Jeffrey Vinik resigned as head of Fidelity Investments' Magellan Fund, his successor has repositioned the massive fund but will have a tough time matching its former glory, analysts said.


Fund manager Robert Stansky over the past year has sold off Magellan's $15 billion stake in cash and bonds and built up a sizable position in stocks in the technology, financial service and energy sectors.


"Stansky's formula is working," said Jack Bowers, publisher of the newsletter Fidelity Monitor. "I think over the long run, Magellan ought to be able to outperform the S&P 500 by about two percentage points a year."


Vinik's exit was the most high profile among a wave of defections from Fidelity that has stripped the company of some of its best-known fund managers.


His departure also focused attention on the lackluster performance of some of the company's equity funds in recent years and spurred many investors to sell Magellan.


Bowers recommends that investors buy Magellan. Stansky has been successful in his search for stocks that show reasonable valuations and good earnings potential, he said.


Over the past year, Fidelity's returns have been hurt by the large position left from Vinik's investments in cash and bonds. But over the past three months, the fund has outperformed 80 percent of all stock growth funds.


For the year ending May 15, according to Lipper Analytical Services, Magellan returned 18.84 percent, compared with 29.31 percent for the S&P 500 for a ranking of 327 out of 709 growth funds.


Over the past three months, Magellan has returned 3.69 percent to rank 147 out of 799 growth funds compared with 4.22 percent for the S&P 500, Lipper said.


In an interview in Magellan's annual report, released Thursday, Stansky said running the $53 billion fund has its challenges but that the transition has been smooth.


"Certainly, running a fund the size of Magellan is more of a challenge than running a smaller fund," Stansky said. "But it's picking the right stocks, not size, that matters."


Other analysts applauded Stansky's stock picks, but said the fund is just too big to match its great returns during the 13-year tenure of famed fund manager Peter Lynch.