Nov. 3, 2003 — When Jason Weiner took over the $892-million Fidelity Fifty Fund (FFTYX) last April, he inherited a fund filled with mid- and large-cap value stocks and a high cash stake. He promptly shifted the portfolio to large-cap growth. The previous manager, J. Fergus Shiel, had focused on value stocks. Shiel ran the fund for less than a year before leaving Fidelity to operate a hedge fund.

“Weiner has focused primarily on large-cap growth stocks, away from the value orientation that Shiel maintained,” said Don Dion Jr., editor of Fidelity Independent Adviser, a newsletter that tracks Fidelity managers.

Jim Lowell, editor of Fidelity Investor, another publication that monitors the firm, said “Jason Weiner has consistently ranked at or near the top of my proprietary manager ranking system, as did Shiel, but their stock-picking styles are dramatically different.” Lowell also noted that “Jason has winnowed the cash stake down and completely overhauled the portfolio, as reflected in the fund’s 230% turnover rate this year. The fund is now virtually all large-cap growth. Jason has also diversified the fund by moving into health care, energy services and industrials.”

Weiner said, “I favor companies with high quality, sustainable earnings growth, but I also like cheap, down and out companies that are getting better.” The manager added, “As far as market capitalization is concerned, I generally look for larger companies with a market cap of at least $1 billion, and tend to favor companies with a market capitalization of between $5 and $10 billion.”

Between March and September 2003, the fund dramatically changed — Weiner significantly increased its information technology stake (17.9% to 32.9%); eliminated exposure to consumer staples (10.3% to 0%); added to financials (10% to 15.9%); boosted health care (3.1% to 11.7%); and reduced telecom services (13% to 3.6%). He also lowered the cash stake from 7% to 2.4%.

As of September 30, the fund’s top ten holdings were Microsoft Corp. (MSFT), First Data (FDC), Clear Channel Communications (CCU), Seagate Technology (STX), Southwest Airlines (LUV), Johnson & Johnson (JNJ), Bank of New York (BK), American Express (AXP), Tyco Intl (TYC) and Crown Castle Intl (CCI).

These stocks represented 33.8% of the portfolio, which totaled 61 holdings.

Dion feels Shiel’s tenure at Fidelity Fifty wasn’t long enough “to get a good handle” on his investment style. “He kept more of a mid and large-cap value stance in the fund, which benefited him last year,” he said. Under Shiel’s stewardship from June 2002 through April 2003, the fund declined 8.5%, while the S&P 500 dropped 10.4%.

Under Weiner’s watch from April 30 through last September , the fund gained 6.7%, underperforming the S&P 500, which rose 9.4% over that span. In a letter to shareholders, Weiner attributed the fund’s underperformance to its reliance on large-cap stocks, which were weak relative to small-caps, and to his heavy allocations in the consumer discretionary, health-care and energy sectors. However, these losses were offset by an overweight stake in the surging information technology arena, the fund’s largest individual sector.

Lowell concurs that Shiel didn’t run the Fifty Fund long enough for him to properly assess Shiel’s investment methodology. “But there was a clear-cut distinction between Shiel and his predecessor, John Muresianu, who kept large cash stakes and invested defensively,” Lowell noted. Shiel began the process of reducing the fund’s cash holdings, which at one point was as high as 30% under Muresianu.

Jack Bowers, editor of Fidelity Monitor, says of Muresianu: “He ran the Fifty Fund like an outright bear market, deep-value fund, with heavy positions in gold, energy and cash at one point,” he said. “Weiner is now running it as more of a mainstream growth portfolio, like what much of Fidelity is doing these days.”

Bowers characterizes Muresianu as “something of a misfit, since he was doing entirely his own thing, in direct contrast to Fidelity’s investment culture. But he was actually quite successful — he responded to the conditions of the bear market.”

Dion indicated that Weiner has managed many funds, including some sector funds, during his decade-long tenure at Fidelity. Weiner recently managed the gigantic Fidelity OTC (FOCPX), which has a heavy tech weighting. “That’s probably why Fidelity Fifty has moved more into technology, since that is a sector Weiner is most familiar with,” Dion said.”

Lowell also said that under Weiner’s stewardship, the Fifty Fund has had “a high volatility, but that doesn’t translate into higher risk. Its beta is only 0.71, making it 30% less risky than the S&P 500. Also, it has an R-squared of just 0.39, so it doesn’t correlate with the S&P 500 at all. It’s a niche portfolio in the hands of, arguably, one of Fidelity’s best stock-pickers. Jason has a history of losing significantly less than the benchmark during market downturns and outperforming them on the upside.”

Lowell said he was surprised by Shiel’s departure. “He was very well regarded by management,” he said. “In contrast, Muresianu had a personality conflict with Fidelity, along with investment style issues. However, it’s not unusual to see top-performing managers at Fidelity leave the company. They are wealthy enough to do it, and some of them get burned out by the corporate culture at Fidelity, which can be extraordinarily taxing.”

Lowell cautions that Weiner is also a “go-anywhere stock-picker.” While the fund is currently skewed towards large-cap growth, “in six months time, he could easily switch to value. His strength is in going anywhere to find the best ideas.”