Fund Times: Magellan Makes Big Payout
Plus, MFS names CIOs, Nygren buys Dell, and more.
Fidelity Magellan (FMAGX) paid a whopping capital gains distribution of $21.25 per share--equivalent to 18% of assets. The payout is a result of manager Harry Lange's dramatic overhaul of the portfolio since he took over last November.
Fidelity was quick to point out that "the vast majority" of shareholders are in tax-sheltered accounts and therefore won't be affected by the distribution.
Still, for those in taxable accounts, it's a bitter pill for a fund with an annualized 2% gain over the trailing five years. The fund has been in redemptions for a while and that may have limited the fund's flexibility in terms of realizing gains.
On the plus side, Lange's overhaul has already perked up performance. For the year-to-date, the fund is up 10%, which is 333 basis points better than the S&P 500. Such outperformance has been a rarity in years past. The fund hasn't beaten the S&P 500 by that much for a calendar year since 1998.
MFS Names New CIOs
MFS Investment Management named executive vice president David A. Antonelli chief investment officer for the firm's non-U.S. and global equity investments, and executive vice president Michael W. Roberge was been named chief investment officer for U.S. investments.
"We have seen tremendous growth in our international funds and portfolios and we want to ensure that we have the correct alignment and structure in our investment management organization, both internationally and domestically," said Robert J. Manning, CEO and CIO of MFS.
Antonelli is a 15-year veteran of MFS, most recently serving as chief equity officer. Roberge previously served as chief fixed income officer and director of fixed income research.
Oakmark's New Investment in Dell Off to Rough Start
Bill Nygren, manager of Oakmark (OAKMX) and Oakmark Select (OAKLX), appears to have been a little early on Dell Computer (DELL). He added the PC maker's shares in the first quarter, but the stock got hit this week following guidance that earnings would be below expectations. Of course, that doesn't mean he was wrong. Like most value investors, Nygren is sometimes early, but those stocks can still work out in the long run.
In his first-quarter letter to shareholders Nygren laid out his case:
"Dell Computer ( (DELL) � $30)
When we started managing the Oakmark Fund we viewed Dell as one of those great businesses that was unlikely to ever get priced cheaply enough for us to own it. In March of 2000, Dell stock peaked at $60--a robust 88 times trailing earnings. Dell's business has performed well since then, with sales and EPS both more than doubling. Dell's stock, however, hasn't done so well, now selling for just half the price it did six years ago. The world's largest manufacturer and distributor of PCs is now priced at less than 16 times expected 2007 earnings. At this price, Dell is selling at only a slight premium to the average company's P/E multiple, and it actually sells at a discount after adjusting for its large cash balance. We think Dell's brand name and low cost structure will provide an enduring competitive advantage that will allow the company to continue growing faster than most businesses, which will warrant the stock selling at a significant premium."
Artisan Sells Minority Stake
Artisan Partners Limited Partnership announced it has agreed to sell a minority stake to Hellman & Friedman LLC.
"The investment will allow current partners of Artisan (including employees) to reduce their interests in the firm through a combination of sales to the H&F funds and repurchases of partnership interests by Artisan using the proceeds of a simultaneous borrowing," Artisan said in a press release.
"Control and management of Artisan Partners will not change," CEO Andy Ziegler said. "This important step for our firm was designed to allow us to grow and evolve while maintaining our historical commitment to independence."
Russel Kinnel has a position in the following securities mentioned above: OAKLX. Find out about Morningstar’s editorial policies.