Insider Monkey

Billionaire Jeff Vinik’s Stock Picks and 10-Year Performance

Ramish Cheema
10 min read

In This Article:

In this piece, we will take a look at billionaire Jeff Vinik's stock picks and 10-year performance. If you want to skip our introduction to the investor, his background, and how some investments have performed over the year, then head on over to Billionaire Jeff Vinik's Top 5 Stocks.

Jeff Vinik has a short history in the hedge fund industry. He set up his fund first in the 90s and then shut it down later after making remarkable returns. Then, he tried setting up his fund again but shut it down in less than a year after citing difficulties in raising capital. A graduate of Harvard University, he is known primarily for running one of the biggest mutual funds in the U.S. and then starting his own hedge fund called Vinik Asset Management.

Both of these earned him his fair share of fame in the finance industry. Under Mr. Vinik's management, the Fidelity Magellan Fund earned quite a bit of controversy as he was criticized for moving the fund's money away from attractive technology stocks into bonds. This was the time when semiconductor stocks (which are all the buzz these days) were in their early phases of their stock market presence. This was also the time when investing in mutual funds - especially by folks who were using their personal savings  - was peaking, as 3 million Americans had piled $3 trillion into the industry.

At Magellan, Mr. Vinik created quite a bit of controversy when it came to light that he had sold large portions of the fund's holdings in semiconductor stocks at a time when the shares were peaking. The semiconductor sector is well known for its cycles of ups and downs, with the latest one undergoing right now as chip makers wait while chip designers' product inventory is digested in the retail chain. Back in the early 1990s, Taiwan and South Korea were rising in stature in the chip world (these two now have some of the most important chip companies in the world). The start of the decade was marked by a strong performance from the Asian firms, but America, which was still a global chip manufacturing base back then, was struggling from an economic contraction in the wake of Iraq's invasion of Kuwait, high inflation, and high interest rates (the economy is also experiencing somewhat similar conditions over the past year or so).

This crunch created the perfect conditions for a boom in 1995 and the subsequent slowdown which was also reflected in the stock market. Just as all this was happening, Mr. Vinik had written to investors of the Magellan Fund that chip firms, such as Micron Technology, Inc. (NASDAQ:MU) were solid investments. This was in a letter that was mailed in November as part of the fund's semiannual report. However, controversy surfaced when the Washington Post reported that Mr. Vinik had actually started selling Micron shares in October and before investors received the letter. This selloff was part of a broader exit from the technology sector with other stocks also being sold. Less than a year after his decision, he would quit Magellan and set up his own hedge fund, with some speculating that the increased scrutiny from 1995 contributed to him leaving Fidelity.

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