Gasp! Could Fidelity's Vanderheiden Have Been Righ
The revered value manager may be getting the last laugh.
The last time I had an opportunity to speak with George Vanderheiden, he had just announced his retirement, saying that he wanted to quit working while he was still young enough to enjoy his money. Vanderheiden was no doubt compensated handsomely for building excellent long-term records at Fidelity's Advisor Growth Opportunities (FAGOX) and Destiny I (FDESX) funds, among others. Already a rich man, he was unable to justify working 70-hour weeks to make a few million more. Although the financial parallels with my own life were, shall we say, less than striking, I could understand why he wanted to spend more time with his family and pursue outside interests--namely, rock climbing.
Although tech fever was then at its height, Vanderheiden had not caught it. On his way out the managerial door, he was still expecting a Nasdaq meltdown, largely because he thought tech-stock valuations had reached ridiculous proportions. He said the prevailing market environment reminded him of 1980, when as a young manager, he paid a short-term price for underweighting red-hot oil stocks. As the oil bubble collapsed in the ensuing years, Vanderheiden recalled, he handily outperformed rivals who had bought energy stocks when they were priced for perfection. As a the-glass-is-98%-empty guy myself, Vanderheiden's pessimism resonated with me. Moreover, it's always worth paying attention to the insights of a man who has managed money for 20 years--and handily beaten the S&P 500 index during that time.
Right now, Vanderheiden is looking pretty prescient. After he resigned, his successors--Bettina Doulton at Advisor Growth Opportunities and Karen Firestone at Destiny I--sold off much of the funds' value fare and loaded up on technology. In fact, both managers raised their funds' tech stakes to more than 40% of assets, whereas Vanderheiden has stashed less than half as much there. To fund these purchases, they sold off beaten-down value stocks like Philip Morris (MO), Tenet Healthcare (THC), and HCA (HCA). As it turned out, the timing for these changes could not have been worse.