Fidelity's Biggest Stock Picks Going Into 2011

BOSTON (TheStreet) -- Fidelity literally means "loyalty," and that's what the largest U.S. mutual-fund company paid to its top two stock picks in 2010, as indicated by the combined $25 billion invested in Apple (AAPL) and Google (GOOG).

Apple, the maker of the iPad tablet and iPhone smartphone, and Internet search engine Google held down the biggest positions in a ranking of the Boston-based company's $579 billion stock portfolio at year-end for the second year in a row.

Last year, Apple was the biggest, and in 2009 it was Google, according to data collected on Fidelity's 177 equity mutual-fund portfolios, based on reports issued by the privately held firm as recently as Oct. 30, and summarized by Morningstar.

Apple had a portfolio value of $15 billion, representing 2.6% of Fidelity's investable equity assets, up 66% from 2009, an increase aided by stock purchases and Apple's 54% share-price appreciation last year. Fidelity owns 5.6% of Apple's outstanding shares, making it the largest shareholder.

Google's combined current $10 billion allocation is down 1% from 2009 to 1.7% of the portfolio, due in part to Google shares' 3.4% decline as well as some minor selling. Fidelity owns 4.5% of Google's shares and is the biggest shareholder.

The S&P 500 Index was up 15% in 2010.

A review of the top 50 stocks owned by Fidelity funds shows, most notably, that there has been big buying of a handful of high-tech firms, including Salesforce.com ( CRM), Oracle ( ORCL), eBay ( EBAY), Broadcom ( BRCM) and NetApp ( NTAP), as well as of two big oil companies, Exxon Mobil ( XOM) and Chevron ( CVX).

Among the bigger bets was online auctioneer eBay, now the 33rd largest Fidelity holding. Its valuation rose 102% in the Fidelity portfolio to $1.9 billion. The firm, with a $36 billion market values, was up 19% last year. Fidelity owns 7% of its outstanding shares, the most of any other company.

Notably absent from the top 50 stocks are two of the year's hottest S&P 500 companies: F5 Networks ( FFIV), up 150%, and Netflix ( NFLX), up 227%.

Chevron, now 0.76% of assets to rank seventh, is up from 22nd in 2009 due to a 43% rise in value to $3.6 billion, including a 19% increase in its share price.

Fast-food giant McDonald's ( MCD) has seen a 49% increase in portfolio value to $3.5 billion, giving it a ranking of eighth, up from 24th in 2009. The increase was helped by a 23% rise in its shares, and lots of buying by Fidelity.

Another firm vaulting into the top 10, due to a 34% gain in its portfolio value, was business-software provider Oracle. It has a valuation of $3.4 billion, or 0.74% of assets, giving it a ranking of ninth, up from 21st at the start of the year. Its shares advanced 28% last year.

Maintaining their top 10 rankings are banker Wells Fargo ( WFC), fourth, at 1.09%, worth $5.2 billion, a 20% decline from 2009 when it was ranked third; beverage giant Coca-Cola ( KO), fifth with a 0.92% allocation at $4.3 billion, up 10% in value from in 2009 when it ranked eighth, helped by a 14% rise in its shares; investment banker JPMorgan Chase ( JPM), is in sixth place at $4 billion, up 29% last year when its shares rose 1.3%; and computer-hardware firm Cisco Systems ( CSCM), in 10th at $3.3 billion, down 16%, hurt by its 16% share-price decline.

Among the companies that lost their top 10 status are: software giant Microsoft ( MSFT), ranked No. 5 in 2009, but 16th now, due to a 44% tumble in its investment, to $2.8 billion, including an 8.6% decline in its stock; Procter & Gamble ( PG), ninth at the end of 2009, but down to 15th now, representing a 19% decline in value to $2.8 billion even as the consumer-products maker's shares rose 6%; Hewlett-Packard ( HPQ), sixth in 2009, down to 48th last year, on a 38% drop in value to $2.6 billion, dragged down by the company's 18% share-price slide; and drugmaker Pfizer ( PFE), 10th in 2009 and 39th now, representing a 37% decline in its value to $2.2 billion, including a 3.9% decline in its share-price value.

Fidelity Management & Research is a privately owned investment manager with $1.5 trillion in assets under management as of Sept. 30. The following is a synopsis of five of the stocks in Fidelity's company-wide portfolio:

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Fidelity is betting that Google ( GOOG) will have a breakout year in 2011 after being stuck in the doldrums for over a year.

The company recently said its growing mobile business should generate more than $1 billion in annual revenue, and its display-advertising unit should contribute $2.5 billion.

Earnings are expected to increase 17% this year. And it's a cash cow, as indicated by the $33 billion in cash on its balance sheet, equivalent to $104 a share. It has only $2 billion of short-term debt.

Fidelity Contrafund ( FCNTX) manager Will Danoff said at mid-year, when Google was down 28%, that he thought the company "and its YouTube video, DoubleClick online advertising and Android mobile-phone operating system subsidiary still held a lot of promise" and that investors had bailed on it in the belief that the social-networking leader, privately owned Facebook, would hurt Google's long-term growth.

In perhaps one of the strongest ratings you'll see from a large group of analysts, 30 rate its shares "buy," five rate it "outperform," and two rate it "hold."

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The biggest mover among the top 50 stocks is NetApp ( NTAP). Held by 29 Fidelity funds, its market value rose almost three-fold in 2010, to just short of $1.5 billion, aided by a 60% rise in share value.

The company has a market capitalization of $19.8 billion. It now ranks 45th among the top 50 Fidelity stocks, with a 0.32% allocation, up from 235 in 2009. Fidelity is the largest investor in NetApp, with a 7% stake.

The company is a growing player in networked storage technology with a focus on the "network-attached storage segment" of the market. A Morningstar analyst reports that "NetApp is one of the dominant suppliers of file-based storage solutions, controlling about one third of the market. Only (industry giant) EMC ( EMC) has a comparable share." Analysts have mixed views on NetApp, with 16 rating its shares "buy," four "outperform" and 18 "hold."

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Broadcom (BRCM), a chipmaker, is now 0.3 % of Fidelity funds' assets at $1.4 billion, more than double that of 2009. That places it 50th, up from a rank of 137. Broadcom is the market-share leader in providing chips for technologies such as enterprise networking, cable modems and set-top boxes.

Future growth should come from the mobile and wireless end market as its chips are used as controllers in a variety of hand-held devices. It is financially healthy as it was sitting on $2.8 billion at the end of the third quarter. Its shares rose 39% last year, giving it a market value of $22 billion, with Fidelity holding the largest stake of any investor, at 7.6%. The Philadelphia Semiconductor Index was up 14% last year.

Analysts give Broadcom 19 "buy" ratings, two "outperforms," 13 "holds" and one "sell," according to FactSet.

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Salesforce.com ( CRM), a cloud-computing innovator, saw its shares owned by Fidelity rise by 65% last year to $2.3 billion, allowing it to grab the 25th spot in the ranking, up from 53rd at the end of 2009.

The company has a market value of $17 billion, and Fidelity has a 15% stake in the company, more than double that of the No. 2 investor.

It has a strong balance sheet, with more than $1.8 billion in cash and only $575 million in long-term debt. It is seen by analysts making acquisitions to build out its product and services offerings. Salesforce.com gets plenty of attention from analysts, as 19 have it rated "buy," two "outperform," 15 "hold," one "underperform," and one "sell," according to FactSet.

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ExxonMobil ( XOM), now ranked three of Fidelity's top 50 holdings with a value of $5.8 billion if 1% of the holdings. The value is up 87% from 2009 when it ranked12th.

Its increase was aided by a 7.6% rise in the price of its shares. ExxonMobil, with a market value of $369 billion, is an oil-industry juggernaut. The company expects production growth to average of only 2% to 3% over the next few years due to capacity limitations. But it remains a cash cow as over the past five years. Exxon paid $39 billion in dividends and repurchased $135 billion worth of stock, reducing shares outstanding by 23%. ExxonMobil shares get four "strong buy" ratings, four "buy" ratings, 11 "hold" ratings and one "reduce," according to a Thomson Reuters survey of analysts.

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