Boosted by the strategy of its new manager in the last two months of 2005, Fidelity's flagship Magellan fund returned 6.4% last year, The Boston Globe reports. In the first 10 months of the year, the fund was up a mere 1%, but since Harry Lange took over Magellan's helm, the fund rose by an impressive 5.4%.
The fund's total return of 6.4% in 2005 bested the S&P 500's 4.9% climb by 1.5 percentage points - the first time Magellan has beaten its benchmark since 2001.
"He's definitely put his own stamp on the fun, which is what we expected him to do," Fidelity spokeswoman Anne Crowley told The Globe. "He's always had a flexible investment style, and that fits well with the capital-appreciation objective of the fund."
Although Fidelity hasn't issued a portfolio holdings report for Magellan since Lange took over from Robert Stansky, Morningstar tracked its basket of stocks and found that Lange has boosted the fund's foreign holdings from 2% to 20% as of Nov. 30, and increased the fund's information technology stocks from 21% to 28%. Those holdings include Google, of which Fidelity is the largest institutional shareholder. Magellan is also now invested more heavily in healthcare and materials companies, while its holdings in consumer staples companies, such as drugstores, beer companies and soft-drink makers, has been scaled back.
Chris Traulsen, an analyst with Morningstar, noted that these calls make Magellan a riskier investment than it has been in many years, but that in order to distinguish the fund and beat the S&P 500, Lange will have to continue making these kinds of bets. Meanwhile, a number of Fidelity's other large funds, including the Growth & Income and Low-Priced Stock funds, lagged their peers.
"It was a good year for the shop, but some of their big funds, they've got to fix," Traulsen said.