Is Fidelity Magellan Fund (FMAGX) a Strong Mutual Fund Pick Right Now?

Zacks Equity Research
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Having trouble finding a Large Cap Blend fund? Fidelity Magellan Fund (FMAGX) is a potential starting point. FMAGX has a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

FMAGX is part of the Large Cap Blend section, an area that boasts an array of many possible options. Large Cap Blend mutual funds most often invest in firms with a market capitalization of $10 billion or more. By investing in bigger companies, these funds offer more stability, and are often well-suited for investors with a " buy and hold " mindset. Blended funds mix large, established companies into their holdings, which gives investors exposure to both value and growth at the same time.

History of Fund/Manager

FMAGX is a part of the Fidelity family of funds, a company based out of Boston, MA. Since Fidelity Magellan Fund made its debut in May of 1963, FMAGX has garnered more than $14.47 billion in assets. Jeffrey S. Feingold is the fund's current manager and has held that role since September of 2011.

Performance

Investors naturally seek funds with strong performance. FMAGX has a 5-year annualized total return of 10.26% and it sits in the middle third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 12.44%, which places it in the bottom third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Compared to the category average of 10.79%, the standard deviation of FMAGX over the past three years is 12.84%. The fund's standard deviation over the past 5 years is 12.83% compared to the category average of 11.05%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

It's always important to be aware of the downsides to any future investment, so one should not discount the risks that come with this segment. In the most recent bear market, FMAGX lost 58.26% and underperformed its peer group by 9.4%. This makes the fund a possibly worse choice than its peers during a sliding market environment.

Even still, the fund has a 5-year beta of 1.07, so investors should note that it is hypothetically more volatile than the market at large. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. With a positive alpha of 0.08, managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

Examining the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is principally on equities that are traded in the United States.

As of the last filing date, the mutual fund has 86.3% of its assets in stocks, with an average market capitalization of $270.10 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Finance
  3. Retail Trade

Turnover is 53%, which means this fund makes fewer trades than comparable funds.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, FMAGX is a no load fund. It has an expense ratio of 0.69% compared to the category average of 1.06%. FMAGX is actually cheaper than its peers when you consider factors like cost.

While the minimum initial investment for the product is $0, investors should also note that there is no minimum for each subsequent investment.

Bottom Line

Overall, Fidelity Magellan Fund ( FMAGX ) has a high Zacks Mutual Fund rank, similar performance, average downside risk, and lower fees compared to its peers.

For additional information on the Large Cap Blend area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into FMAGX too for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.


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