April turnaround in financials lifts Magellan Fund

Harry Lange, manager of Fidelity Investment's $39.4 billion Magellan Fund, bought financial stocks including JPMorgan Chase and Bank of America, leading to the fund's biggest monthly gain in five years.

Lange upped his stake in banks and brokerage companies in March by 1.9 percentage points, about $750 million, to 10 percent of the fund, data compiled by Bloomberg show. He bought $408 million in JPMorgan and $190 million in Bank of America.

Financial stocks in April reversed six months of declines that were caused by the subprime-mortgage crisis. The Standard & Poor's 500 Financials Index gained 6.5 percent, including reinvested dividends, after dropping 28 percent in the prior 12 months. Magellan, once the largest U.S. fund, matched the index and had its biggest monthly gain since April 2003.

"He's calling the bottom in financials," said Jim Lowell, chief strategist at Adviser Investment Management in Watertown, Mass., whose clients buy Fidelity funds. "He's aggressively buying for the first time in a decade."

Lange has managed Magellan since October 2005 after running Fidelity Capital Appreciation Fund for almost 10 years.

Alexi Maravel, a spokesman for Boston-based Fidelity, said Lange declined to comment.

Lange bought $31 million in Bear Stearns, which almost collapsed in March before the Federal Reserve shepherded an emergency buyout by JPMorgan, the third-biggest U.S. bank.

Since slumping to $2.84 on March 17, New York-based Bear Stearns more than tripled through April. JPMorgan, also in New York, gained 12 percent in April. Bank of America, the second-largest U.S. bank, dropped 2.9 percent this year through May 1.

Lange increased his stake in Morgan Stanley by about $276 million and bought $165 million in Goldman Sachs Group. The New York-based securities firms rose by 7 percent and 16 percent, respectively, in April.

He also purchased a $100 million stake in Visa, the San Francisco-based credit-card network that completed a $17.9 billion initial public offering in March. Since going public, Visa nearly doubled, through April.

Lange decreased his stake in Google by 400,000 shares, or about $229 million based on the April 30 closing price. The Mountain View, Calif.-based company, owner of the most-used Internet search engine, rose 30 percent in April after falling 36 percent in the first three months of the year.

Lange also sold his $418 million stake in Minnetonka, Minn.-based UnitedHealth Group and a $327 million stake in Fannie Mae.

UnitedHealth declined 43 percent this year, through April. Fannie Mae, the U.S. mortgage-finance giant, fell 24 percent.

Magellan, the largest U.S. mutual fund when it reached $110 billion in assets in 2000, reopened in January for the first time in 10 years.

The fund invests in large companies that Lange expects will show better-than-average growth in profits or revenue.

Over the past five years, Magellan has returned an average 10 percent annually, ranking it ahead of 63 percent of funds with a similar investment style.