Fidelity And The Net Not Yet
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As summer draws near Internet stocks cool off with only 8 of the 50 ISDEX stocks finding that warm fuzzy feeling, that is to say, ending up today.
Technology shares also simmer down as anything tech-related gets relegated to the interest-rate worry game. In case you hadn't heard consumer prices apparently popped a bit too much in the latest government stats, leading some to think Alan Greenspan may try and tweak the money supply.
What usually happens is the high-growth industries with voracious bottom lines (i.e. losses) can find earnings and the ability to raise public capital (via IPO) more difficult. If it's any consolation today even the dutiful Dow fell in line with NASDAQ and ISDEX, both indices drop -2% in tandem.
Also worth noting is Fidelity's Magellan Fund manager Robert Stansky, with $93 billion assets managed, who tells Reuters that despite AOL (NYSE:AOL) being his biggest gainer in the fund in the past year Magellan isn't a big holder of Internet stocks due to lack of earnings.
Granted, Magellan is not a growth fund and moving billions into the Net sector is difficult given the thin floats of the shares. Magellan's first-quarter 1999 gain was 25.63 vs. 150% for my portfolio and a 91% gain for ISDEX.
I would think the sheer size of Magellan, as the 'elephant of funds', prohibits it more than anything from being a player at the hottest ticket for the economy: the Internet.
In related oracles another Fidelity spokesperson said the other day the fund giant had considered an Internet mutual fund but passed because of the volatility of the sector. It was also volatile for Henry Ford to invent the Model A at a time when horses ruled; David Rockefeller to drill for oil in the middle of nowhere when gasoline was hardly worth the dirt it spewed from; Andrew Carnegie to mold raw earth into unrivalled steelworks; Christopher Columbus to sail a few ragtag ships across a flat world that he helped make round again.
Volatility is another word for high risk AND high reward.
Fidelity has already missed out on more than 100% gains it could have enjoyed with an ISDEX mutual fund this year, and 187% in 1998. In the year 2004 they will probably start a Net fund, 10 years after the revolution began and all the upside is gone. Magellan portfolio itself will by its nature be unable to avoid the Net since every Fortune 100 company is adopting the Web as a business platform.
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