Tired of poor performance, Fidelity has replaced Harry Lange with Jeffrey Feingold as the manager of the Fidelity Magellan fund, FMAGX. Should you buy, sell, or hold Fidelity Magellan mutual fund shares?
With a rich history, the Fidelity Magellan fund is among the widely followed mutual funds.
Originally managed by Fidelity’s Chairman and Chief Executive Officer Ned Johnson, the fund rose to prominence under Peter Lynch’s stewardship. Managing the Fidelity Magellan fund from 1977 to 1990, Lynch averaged gains of 29% per year to crush the S&P 500 index by nearly 14% per year.
Jeffrey Vinik, who succeeded Lynch, garnered decent returns though not as spectacular as what Lynch delivered.
Fidelity Magellan shareholders have suffered from poor returns after Vinik’s departure in 1996 … first under Robert Stansky through 2005 and under Harry Lange since then.
Lange’s bets on financials like American International Group (AIG) and Wachovia during the 2008 crisis failed and damaged Magellan’s performance. So too did his wagers on foreign companies like Nokia (NOK).
For the past five years, the Fidelity Magellan fund has trailed 97% of its peers losing at a 2.6% annual rate.
At nearly $15 billion, Fidelity Magellan mutual fund’s assets are now just a small fraction of $110 billion they tallied in 2000. During Lange’s tenure, the fund’s assets shrank by a whopping $33 billion. Lange now passes on a much-diminished Magellan to Jeffrey Feingold.
There are three reasons why long-suffering Fidelity Magellan shareholders can feel optimistic about Feingold. They include past achievements, investing style, and experience.
Feingold currently manages Fidelity Trend (FTRNX), Fidelity Large Cap Growth (FSLGX), Fidelity VIP Growth Stock (FPVDC), and Fidelity Advisor Strategic Growth Fund (FTQAX).
Fidelity Trend and Fidelity Advisor Strategic Growth rank in the top 15% of large cap growth funds over the past five years. These funds along with Fidelity Large Cap Growth have performed quite well over the past year ranking in the top 10%.
Feingold tends to look for companies with growing earnings across all economic sectors.
While obvious choices in information technology and consumer discretionary like Apple (AAPL), Google (GOOG), and Amazon (AMZN) are among Feingold’s favorites, he extends his search beyond these sectors to other themes like nutrition, obesity, and budget-consciousness. Schiff Nutrition International (WNI), Herbalife Ltd (HLF), and Weight Watchers International (WTW) are among the names Feingold likes.
Looking at U. S. versus foreign allocation, Feingold prefers the U. S. … at least currently. His funds on average have about 10% of their assets invested in foreign stocks compared to Magellan’s 23%.
Feingold has risen through the ranks at Fidelity, managing sector funds like Fidelity Select Financial Services (FIDSX), Fidelity Select Consumer Finance (FSVLX), and Fidelity Select Defense & Aerospace (FSDAX) as well as the equity sleeves of Global Balanced (GBALX) and Fidelity Worldwide (FWWFX). Feingold’s hands on experience in the financial sector can come in handy during these strained economic times.
The opportunity to manage the Fidelity Magellan Fund is a big step up for Feingold. Fidelity Trend, the largest of the funds managed by Feingold currently has around $1 billion in assets, a small fry compared to Fidelity Magellan. It remains to be seen if Feingold can translate his success with the smaller funds to a larger Magellan.
All-in-all, Fidelity Magellan mutual fund is a Hold. Fidelity Magellan fund shareholders should consider holding their shares to see if Feingold can reduce their pain of years of underperformance. Others should not bother with history. Feingold’s Fidelity Magellan fund is worth watching from the sidelines … at least for now.