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Fidelity chooses to sell off drugmakers and add tech firms

Fidelity Investments, the biggest US money manager, sold drug stocks in the third quarter and boosted stakes in Microsoft Corp, AT&T Corp and other technology-related companies.

The Boston-based firm dumped 15.9 million shares of Eli Lilly & Co, the maker of Prozac, worth US$1.2 billion, its biggest sale in the period, according to Thomson Financial/Carson, which compiles regulatory filings. The firm also cut holdings Schering-Plough Corp, Pfizer Inc, Merck & Co, Novartis AG and Pharmacia Corp, according to Thomson.

"Fidelity managers remain defensive but they're trimming these positions a bit," said Jim Lowell, editor of Fidelity Investor, an independent monthly newsletter based in Needham, Massachusetts. The sales suggest some managers "think maybe a bottom has been reached," Lowell said.

The retreat was not uniform, as Fidelity also added 22.7 million shares of Johnson & Johnson, worth US$1.2 billion -- its biggest purchase.

The Amex Pharmaceutical Index rose as the Standard & Poor's 500 Index fell 15 percent, its worst quarter since 1987. The benchmark has since climbed about 10 percent, boosted by optimism 10 Federal Reserve interest rate reductions and US$100 billion of tax cuts and spending proposed by the Bush administration will revive the slumping economy.

According to Thomason, the other biggest purchases were technology related. Fidelity, which oversees US$813 billion, added 49 million shares of AT&T worth US$940 million and 18.2 million Microsoft shares worth US$930 million.

Fidelity also bought 4.3 million shares of Enron, bringing its stake to 20.8 million.
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