April 7, 2008
Fidelity Opens New Fund

Fidelity has launched a new fund: 130/30 Large Cap. The origins of its unusual name is that, unlike traditional stock funds that go "long" the market (meaning that they bet share prices will rise), a portion of this fund’s assets will actually "short" specific stocks, industry sectors or even entire market segments (say, small-cap growth stocks). In this way, it’s actually akin to a hedge fund.

The fund shorts through the use of futures contracts. The short sale of a stock or an exchange-traded fund (ETF) is done when that security is expected to underperform the market or even lose value.

As for the fund’s name, it’s derived from the fact that its manager (Keith Quinton) will target long positions of 130% of its assets (using leverage), and short positions of 30%. The market value of its long minus its short positions will equal roughly 100%.

Security selection will flow from a combination of quantitative analysis (computer-driven programs that scrutinize such metrics as growth rates, valuations and risk) and fundamental research (a company’s balance sheet, its products and the markets it serves). Its holdings will principally consist of U.S. large-cap stocks (such as those found in the S&P 500 and Russell 1000 Index), but may also include foreign companies.

130/30 Large Cap requires a $10,000 minimum investment, has no loads or redemption fees, but is expected to have an expense ratio of 1.89%. However, Fidelity has put on an expense cap of 1.30%, although they do not say how long that cap will be in place. While it is arguably more expensive to operate given the additional costs required to run such a fund, its expenses are actually in line with similarly run fund competitors. We rate 130/30 Large Cap OK to Buy.

April 1, 2008
Fidelity Manager Changes

Joanna Bewick has been named co-portfolio manager of Strategic Income, Strategic Dividend & Income and Strategic Real Return, which she will run with current manager Derek Young. Joanna joined Fidelity in 1997 as an analyst in Fidelity’s fixed-income division. In 2000 she joined Fidelity Management Trust Co. and worked as senior investment analyst, conducting asset allocation studies and liability analyses for institutional investors.

Bill Irving has been named manager of Mortgage Securities and Intermediate Government Income, replacing Brett Kozlowski. Bill will continue to run Government Income, Ginnie Mae and Inflation-Protected Bond.

Jess Tan has been named portfolio manager of Southeast Asia, replacing Allan Liu, who will continue to manager equity portfolios available exclusively to overseas investors. Jess joined Fidelity as an analyst covering Asia-Pacific regional markets in 2000. In 2002, he began managing Asia-Pacific equity funds for overseas investors.

Colin Stone has been named co-manager of International Small Cap, where he will join current co-managers Wilson Wong and Tokuya Sano. Colin, who succeeds Ben Paton, will be responsible for the fund’s investments in Europe and non-Asian countries. Colin joined Fidelity’s London office in 1987, and since 1996, has managed a number of European funds available exclusively to overseas investors. He also managed Nordic from 1995 to 1998.

February 6, 2008
Fidelity names sole manager for Puritan

Ramin Arani has been named sole portfolio manager of the equity portion of Puritan, which he has been co-managing with Steve Petersen since February 2007. George Fischer will continue to manage the fund’s bond portion. Steve will continue to run Equity-Income and VIP Equity Income. Before joining Steve on Puritan, Ramin managed Trend from 2000 to January 2007. He joined Fidelity's equity research department in 1992 covering defense electronics companies, and subsequently followed real estate investment trusts. He has also managed Select Retailing and Health Care. We are maintaining our Buy rating on Puritan.

January 14, 2008
Fidelity Re-Opens Magellan

More than 10 years after closing Magellan to new investors, Fidelity has re-opened the fund, effective January 15. At about $45 billion, the fund has less than half the assets it had at its peak in 1999, when it held nearly $106 billion. (When it closed in September 1997, assets stood at $61 billion.) Even at $45 billion, it's still Fidelity's third-largest stock fund, behind Contrafund and Diversified International.

Since October 2005, Magellan has been managed by Harry Lange and, over that time, has returned nearly 26%, compared with 21% for the S&P 500. Since taking over the fund, Harry has significantly increased its foreign exposure (now almost 30% of assets) and cut its market cap by almost two-thirds by adding more mid- and small-cap stocks.

According to Fidelity, 85% of the fund's assets are earmarked for retirement and, as baby boomers have begun to retire, they have been redeeming shares. As fund shares have been sold, Harry says, he has sometimes had to sell stocks that he might otherwise like to keep in the portfolio.

We will have more information about the fund's re-opening in the February report. For now, we are keeping our OK to Buy rating on Magellan.

January 4, 2008
New Manager for Mid Cap Growth

Patrick Venanzi has been named portfolio manager of Mid Cap Growth, succeeding Bahaa Fam, who has taken on a venture capital role within Fidelity Biosciences. Patrick joined Fidelity in 2001 as an analyst following retail stocks and other consumer industries. He then followed semiconductor companies before joining the small-cap team in 2005, where he covered property/casualty insurance and medical-devices companies. In 2006, he joined Fidelity's mid cap team. However, he has no prior experience as a fund manager. We are maintaining our Sell rating on the Mid Cap Growth.