Fidelity Investments - especially its flagship Magellan Fund - sold at least $1.2 billion of Chrysler Corp. stock during the first three quarters of 1996.
But either to cover its tracks, or to take advantage of a drop in Chrysler's stock price, the giant mutual fund manager also bought the auto stock in midsummer.
Now, it appears to be selling again.
During this process of selling and buying and selling again, Chrysler dropped from being Magellan's largest stock holding to its third-largest.
Fidelity dumped more Chrysler stock than all other money managers combined in the second quarter. And second-quarter selling of Chrysler stock was so heavy the company ranked eighth in net sales among the top 100 stocks held by institutions, even though it only ranked 56th in market capitalization, according to the June 30 CDA/Spectrum report.
During the quarter ended June 30, FMR Corp. - Fidelity's parent - sold 14.486 million shares of Chrysler, worth almost $435 million, leaving it with 31.435 million shares, according to CDA/Spectrum.
By contrast, the other 379 money managers with Chrysler holdings collectively sold a total of 12.097 million shares during the period.
But as of Aug. 12 - the most recent date for which information is available - FMR's stake was back up to over 57 million shares, or 7.9% of Chrysler's shares outstanding. Fidelity is Chrysler's second largest shareholder (Kirk Kerkorian is first).
Nevertheless, Fidelity's Aug. 12 stake was well below its year-end 1995 holding of 99.2 million shares, or 13.6%, of Chrysler.
Fidelity officials declined to comment on the selling.
The $53 billion Fidelity Magellan fund may again be reducing its Chrysler position.
On Aug. 31, as portfolio manager Bob Stansky continued a shift into equities from fixed income, Chrysler was the third largest stock holding in Magellan. On April 30, however, Magellan listed Chrysler as its top stock holding. (Mr. Stansky assumed management of Magellan in June, succeeding Jeffrey Vinik.)
"Chrysler was Vinik's bet. Stansky . . . is a little more growth oriented . . . He's been selectively reducing the defensive bets Vinik had put in the fund," said Jack Bowers, editor of Fidelity Monitor, an independent newsletter Rocklin, Calif.
As for why Fidelity later bought more Chrysler shares, Mr. Bowers said: "When Fidelity has to unload a large position, lots of times it will buy on one side and sell on the other" to minimize market impact.
In fact, he said Fidelity used the same technique last year to unload $20 billion in technology stocks. Although the technology move later was highly publicized, at the time "the market had no clue what they were doing," he said.
Fidelity is not the only one selling, but with such a large position, its moves might have limited Chrysler's price gains as the market rose.
During the second quarter, the value of Chrysler shares dropped by $755.9 million to $13.145 billion. Chrysler had 373.9 million shares outstanding as of June 30.
Seth Glickenhaus, senior partner and chief investment officer of Glickenhaus & Co., New York, reckons Fidelity has sold about 30 million shares of Chrysler stock in each of the past three quarters.
"There's been a lot of what I would even call aggressive selling in the stock," said Laszlo Birinyi, president of Birinyi Associates, an investment research firm in Greenwich, Conn.
According to Mr. Birinyi, Chrysler Corp. experienced net selling of more than $205 million in large blocks from June 13 through July 24. The stock achieved its six-month peak, closing at $34.75 on June 13. (Shortly thereafter, FMR Corp. disclosed its sharply reduced Chrysler position.) But soon after, the stock fell $8 to a six-month low of $26.75 on July 24 and 25. Just two weeks later, FMR reported significantly increased Chrysler holdings.
From July 24 to Sept. 19, the stock rallied to close at $28.375, despite additional selling of $150 million, according to Mr. Birinyi.
The stock closed at $31.50 Oct. 10.
"People selling a stock that was going up must have really wanted to sell. That tells me they have a dim view of the outlook," said Mr. Birinyi.
Fidelity's moves have created buying opportunities for other money managers.
Mr. Glickenhaus, for example, has been able to snap up Chrysler, his long-time favorite stock, at what he considers bargain prices.
"Fidelity was liquidating a position that was 93 million (shares). Today it's down to less than 20 million. They're still getting out and have put great pressure on (the stock)," he said.
Mr. Glickenhaus estimates Chrysler's earnings per share will be $4.60 to $4.80 in 1996 and $5 in 1997.
"(Chrysler) has $7.5 billion in cash and short-term paper - worth $11 a share. Last year they bought back $1 billion of stock and in 1996 they will have bought back $2 billion." He thinks the company might buy back another $2 billion next year.
"It's the most productive auto company with the lowest debt-to-equity ratio of the Big Three (automakers)," Mr. Glickenhaus said. What's more, Chrysler has funded its unfunded pension liability and 65% of its vehicles are in the most profitable market niche: minivans, sport vehicles and trucks.
Russell E. Thompson, senior vice president of Waddell & Reed, Overland Park, Kan., also likes the stock, as well as other U.S. automakers. Chrysler's stock now comprises almost 3% of his $5 billion equity income portfolios.
In 1993, when the firm invested in Chrysler, "we felt the auto companies would do well over a long period of time . . . They're still in the early stage of growth on a worldwide basis, not just in the United States," he said.
To date, there's been little top-line growth. Instead Chrysler's stock gains have been fueled by its strong generation of cash, Mr. Thompson said.
But in the future, an interest rate decline and improving inventory management will push auto stocks higher, he said.
"Because of the poor economy, when we have lower rates, those stocks will be in the forefront of the market going higher," Mr. Thompson said.
"Chrysler has done a good job of creating value for shareholders, and still generating cash," he said.
Luke Mazur, chief investment officer of Merus Capital Management, San Francisco, which runs $12 billion, has 1% of his $2 billion equity income portfolios in Chrysler.
Mr. Mazur said of Chrysler: "We like it. It's our favorite in the auto group." He cited Chrysler's very efficient operations and its popular Jeep Cherokee and Ram pick-up trucks. He rates the stock a "strong hold" even though, based on his 1996 earnings estimate of $4.60, it has a rock-bottom price-earnings ratio of 6.
What's more, as of Sept. 30, when the stock traded at $29, its dividend yield was generous at 4.8%.
Why not buy more? "Because of foreign competition in the sport utility vehicle market from Japanese and European automakers. We want to see how the retail consumer market reacts to foreign entry."