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The Fidelity Magellan Fund: An Average Year until March 18

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Fidelity Magellan Fund performance

In this article, we’ll outline the performance of the Fidelity Magellan Fund (FMAGX). The fund is invested in stocks of companies such as Danaher (DHR), Ross Stores (ROST), Raytheon (RTN), Cigna (CI), and Leggett & Platt (LEG).

From a purely NAV (net asset value) return standpoint, the Fidelity Magellan Fund stood fifth in the one-year period ended March 18, 2016, among its peer group. When we refer to the peer group, we mean the group of 12 funds chosen for this review. To compare returns, we have chosen two ETFs: the Vanguard 500 ETF (VOO) and the iShares Russell 1000 Growth ETF (IWF).

For evaluating benchmark-related metrics, we’ve chosen the S&P 500 as the benchmark for all funds in this review, which VOO tracks.

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Other metrics

The FMAGX’s standard deviation, or the volatility of returns, in the one-year period ended March 18 was 18.1%. This is much higher than the S&P 500’s 16.7% but a little lower than the peer group’s average of 18.4%.

The fund’s risk-adjusted returns, calculated via the Sharpe Ratio, were negative for the one-year period ended March 18. Evaluating a negative Sharpe Ratio may be misleading, so we’ll avoid that. The ratio for 2015 had placed FMAGX seventh among its peers.

The information ratio, calculated with the S&P 500 as the benchmark, was negative for the one-year period ended March 18. Alike the Sharpe Ratio, we can’t evaluate a negative information ratio. The information ratio shows the consistency of a fund manager along with measuring the manager’s ability to generate excess returns over a benchmark. The higher the reading, the better the consistency. For 2015, the fund’s information ratio ranked it sixth.

A note to investors

FMAGX stood in the middle of the pack as far as its Jensen’s alpha for the one-year period ended March 18, 2016, is concerned. The previous year was not much different in this regard as the fund’s alpha had come in seventh among its peers.

If you intend to spread your investment across several US large cap funds, then FMAGX might be an option to consider, but allocation to it could remain smaller than other funds. Investors already invested in the fund need to look at the fund’s performance across the market cycles before deciding whether to hold on or to liquidate their investment.

In the next article, we’ll look at the Fidelity Series All-Sector Equity Fund (FSAEX).

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