No, you can't scale the wall around

Fidelity's

managers on Devonshire Street in Boston for a chat. But you can talk to Jim Lowell, who talks to and about them for a living.

Related Stories

Ima Winner and Ima Loser Mid-Cap Value Funds

The Big Screen: The Anthony Young of Stock Funds

I Own What?! Some Growth Funds Stash Cash Under the Mattress

At the start of 1998, Lowell founded

Fidelityinvestor.com

, an independent newsletter that tracks and ranks the Boston fund behemoth's funds and managers. In addition to writing about Fidelity's stock and bond mutual funds, home to more than $560 billion, he also offers advice on how you can bundle them together.

Which Fidelity funds deserve your money and which are bowsers? How are the firm's pros building their portfolios now and when do they think the

Nasdaq's

free fall will end? Read on.

1. What's your favorite Fidelity stock fund for the core of an investor's portfolio?

A core fund really has to have a stock picker you can trust with 25% or so of your assets. It should be someone who you really don't have to worry about in any market environment, and for me the answer is Charles Mangum, who runs

(FDGFX) - Get Report

Dividend Growth. Throughout his career at Fidelity he has outperformed his benchmark, and his current fund is doing it again by a wide margin with significantly less risk.

As the technology bubble was getting inflated in 1999, Charlie just wasn't buying any of it. As a matter of fact, he's got the exact same weighting that he had at the height of the bubble in technology. It's just that today it's a slight overweighting relative to the market.

He's only down 9.6% so far this year, leading the

S&P 500

by more than 7 percentage points.

Talking With: Jim Lowell

Editor: Fidelity Investor

2. You didn't pick (FMAGX) - Get Report Magellan, the biggest fund in the nation with some $77 billion. Is that because it's closed to new investors, or do you see a problem?

For the first time I put a sell on Magellan last month. Basically, I think

portfolio manager Bob Stansky's agility is being hobbled by the sheer size of the fund. He's done an outstanding job -- he trails the S&P 500 by only 0.5

percentage points over the past five years -- but it's a tremendous job with what is, I think, almost an unmanageable fund.

To have a stock make a meaningful impact on the overall total return of a fund this big, you're forced to skew very large-cap. When he ran

the Fidelity

(FDGRX) - Get Report

Growth Company

fund from 1987 to 1996, his record was basically unrivaled. How did he do that? Well, he did that by Fidelity's old-fashioned way. Smart stock picking in the small- and mid-cap arena, driving above-average growth. He can't really do that with Magellan.

If you own the fund in a tax-advantaged account and you have the option of Dividend Growth, then to me, make the trade. One caveat is that in many retirement plans, many plan participants only have a choice between Magellan and an S&P 500 index fund. In that case, I'd still bet on Bob.

A Core-Fund Candidate
Charles Mangum has topped his peers since taking
the fund's reins in January 1997

Source: Morningstar. Returns through Sept. 6

3. Do you think Bob's going to keep running this fund for a long time?

He won't talk about it and, of course, nobody

at the company will say anything about it, so I don't know. He says he's very happy and he very well may be. But that goes against the grain of what I know about Bob Stansky, which is that he's a growth-oriented investor. That runs deep enough in his blood to make him want to run a more nimble fund.

4. You mentioned Charles Mangum and the good job he's doing with Dividend Growth. On thinking of the flip side, I think of Bob Bertelson who's really struggled with Fidelity Aggressive Growth since he took over for Erin Sullivan in February last year.

Bob has consistently ranked as one of the worst stock pickers among the growth-fund managers. I don't see him being able to suddenly find the skill set that has basically eluded him throughout his career.

The thing to remember is that with Aggressive Growth, there's tremendous leeway

to avoid losses. It's tended to be more mid-cap in orientation, but it can be small-, mid- or large-cap. I think he made a fundamental mistake, as he has consistently in the past, and that's why he ranks as low as he does. I think he thought the stocks he owned were going to come back, and then they kept falling. The last thing you want in an active manager is someone who gets frozen in a belief as opposed to paying attention to what the market is telling you.

Too Big?
Lowell thinks Magellan is too sluggish for Bob Stansky
to shine

Source: Morningstar. Returns through Sept. 6

What's your advice for people who own the fund?

Sometimes you have to cut your losses. I think a lot of people are holding onto Aggressive Growth hoping that the market's going to come back. If that's your thinking, you're in deep trouble because you're basically asking the market to help your manager. But you're also in trouble because you're missing out on the better manager and the better opportunity if in fact you're right and the market does bounce back, which is

(FOCPX) - Get Report

Fidelity OTC run by Jason Weiner. There's absolutely no reason why you shouldn't be selling Aggressive Growth and buying OTC if you have a long-term conviction in the aggressive-growth side of the market.

5. What do you think the firm's managers' take on the technology sector is right now? How are they positioning their portfolios in such a dicey market?

Over the past year Fidelity as a whole has shifted dramatically away from technology, which were four out of their five largest holdings a year ago. They've moved to a far more diversified, defensive, "Prudent Man" portfolio. So, for example, as of June 30,

Microsoft

(MSFT) - Get Report

was their No. 1 holding --

Cisco

(CSCO) - Get Report

was a year ago -- but then there's

GE

(GE) - Get Report

,

Citigroup

(C) - Get Report

,

ExxonMobil

(XOM) - Get Report

,

Fannie Mae

(FNM)

,

Pfizer

(PFE) - Get Report

,

Philip Morris

(MO) - Get Report

...

These companies will not go to zero, and they own some of these companies in a huge measure. Fidelity's holdings represent about 3.5% of the entire value of the U.S. stock market. Fidelity wields a mighty sword on Wall Street.

6. Historically, Fidelity's size has given them better access to companies' management. Have the new rules regarding fair disclosure of company information taken away some of Fidelity's edge or do they still have better access?

Yes, they probably do still have better access.

Because of the big stakes they have in companies?

Well, it's not just that. They are so -- well, I guess it is just that. They command attention, so I would say they'll consistently have better access. But the more meaningful side of that access is what they can do with the analysis once they have that access. They don't need a CEO to tell them that things are going well or poorly. Anybody who would take that at face value wouldn't last very long in any shop, but they just have, I think, an unrivaled ability to parse any statement into the constituent elements of truth and falsehood.

If

Intel

(INTC) - Get Report

comes into Fidelity's doorway, they don't look at the company only from a fundamental analysis, a typical stock picker's point of view. They can have their bond group come in and kick the tires, too. Then the two

bond and equity fund managers speak to each other and come up with, I think, a far more insightful conceptualization of the actual profit potential for the company.

Falling Down
Bob Bertelson took over in February 2000,
and things haven't gone well

Source: Morningstar. Returns through Sept. 6

7. What tech stocks are Fidelity managers favoring? Where are they willing to commit capital in such a bleak time?

Well, it's companies like Microsoft and Intel, which is their eighth-largest holding. Just the heavy hitters, basically.

IBM

(IBM) - Get Report

is their 15th largest holding. Cisco is their 23rd largest holding. ...

But for Cisco, for instance, that's faint praise, right? That's still underweighted relative to the S&P 500.

Yes, but actually there were some managers buying Cisco in the second quarter, so I would say we're beginning to see what I would call some tentative bottom positions here. But part of that is managing a portfolio. For instance, you own Cisco at $50, then you can buy it at $14, so you do it to reduce your overall cost on the way down. But I do think there's some belief that by 2002 some of these companies will be looking pretty attractive at their current price levels. I haven't talked to any manager who thinks we're going to return to the price levels we saw when had the technology bubble.

It's not next stop: Nasdaq 5000.

No, I don't think so. They think it could be Nasdaq 2500 by the year 2002.

8. What's the most intriguing move by a Fidelity manager over the past year?

There were a couple. One was in semiconductor stocks, where many Fidelity managers, but in particular Jason Weiner, who manages the Fidelity OTC fund, were just dead-bang on target in selling them last year. At that point in time it was very unclear whether we were going into a horrific bear market for the semis and technology. It's impressive because the hardest thing for a fund manager to do is sell your winners. If you'd owned semis for the prior two-and-a-half years, you were sitting on near triple-digit gains or better. That's where discipline and analysis come to bear. So that's one.

Another is that managers became much more willing to take short-term gains when and where they could find them and move on. They remain so this year. They're very aware that this market's basically now completely unruly. I haven't talked to any manager who thinks things are OK.

9. In terms of funds folks should avoid, we singled out Aggressive Growth, but what are some other funds with a lot of assets that are sputtering?

I'd be concerned about

the $34 billion

(FCNTX) - Get Report

Contrafund. Will Danoff isn't having a terrible year. He's down 15.2% and the market is down 17.1%. But you have the option of a better fund like Dividend Growth, which is down 9.6% and is more likely to rally back significantly better if the growth side of the market takes off. Danoff is running Contrafund with virtually no technology in his portfolio. Danoff has just 4% of his fund in tech stocks.

Another fund I'd scrutinize is

(FGRIX) - Get Report

Growth & Income. Again, a better choice than Growth & Income is Dividend Growth. I keep coming back to the idea that you just don't need to look much beyond Charles Mangum at Dividend Growth as a core holding. On the more aggressive side of the fence, you certainly could look at Fidelity Growth Company or Fidelity OTC.

But on the flip side of that would be funds like

(FBGRX) - Get Report

Blue Chip and

(FLCSX) - Get Report

Large Cap Stock.

John McDowell, who runs Blue Chip, is just slightly above average, and Karen Firestone, who runs Large Cap Stock, is slightly below average. Why bother with them? You can

go with Dividend Growth and Growth Company, where you have significantly better managers in terms of outperforming benchmarks with less risk.

10. Back in June Abigail Johnson, daughter of Fidelity Chairman Ned Johnson, took over the mutual fund business. Will she end up running the whole company, and do you think the firm will ever be public?

10 Questions Archive

Janus Growth & Income's David Corkins

White Oak Growth Stock's Jim Oelschlager

Firsthand Funds' Kevin Landis

Oakmark's Bill Nygren and Transamerica's Jeff Van Harte

John Hancock Financial Industries' Jim Schmidt

Vanguard Growth Equity's Bob Turner

Well, it's a natural progression for her to run the firm, and running the fund business is essentially running the company because basically everyone associates Fidelity with its funds. People don't think of Fidelity as the overall empire or business, like the insurance company or Boston Coach

the company's limousine charter unit. So it's clearly a step toward basically succeeding her father, but there's no immediate inclination or signs of wanting to step down. I think Ned Johnson is almost 70, but he's still very active in the everyday business.

I don't know if they'll never be public, but to me the key benefit of seeing Abby rise to this position, especially this year, is to send a clear and compelling message that Fidelity's going to remain privately held. This is a tough market, but it's Fidelity's kind of market in terms of using their research to pick stocks and add value.

Ian McDonald writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

imcdonald@thestreet.com, but he cannot give specific financial advice.