Fidelity Doubles GE Stake as Capital Group Reduces Holdings
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By Charles Stein

May 19 (Bloomberg) — Fidelity Investments, the world’s biggest mutual-fund company, more than doubled its stake in General Electric Co. while Capital Group Cos. sold about 62 percent of the shares it held.

Fidelity bought 90.3 million GE shares in the first quarter, according to data compiled by Bloomberg. That raised Boston-based Fidelity’s holdings to 1.6 percent of GE on March 31. Capital Group, the Los Angeles-based manager of the American Funds family, sold 380 million shares, dropping its stake to 2.2 percent from 5.8 percent on Dec. 31.

GE Chief Executive Officer Jeffrey Immelt and the company’s board cut the shareholder dividend in February for the first time since 1938 to preserve cash. Peter Sorrentino, who helps manage $13.8 billion at Huntington Asset Management in Cincinnati, said Fidelity was on the right side of the trade.

“We could get a nice rebound in the stock over the next 24 months,” Sorrentino, whose firm holds more than 6 million GE shares, said in a telephone interview.

GE reduced its payout as the longest U.S. recession in a quarter century ate into profit at its finance unit, GE Capital. The Fairfield, Connecticut-based company lost its top debt ratings from Moody’s Investors Service and Standard & Poor’s Ratings Services for the first time in decades.

The stock declined 38 percent in the first quarter, and 17 percent this year.

‘Overdone’ Concerns

The stock has doubled since falling to $6.66 on March 5 when Chief Financial Officer Keith Sherin went on the company- owned CNBC cable-television network to say concern over risk at GE Capital was “overdone” and that he didn’t see a need to add more capital.

GE rose 61 cents, or 4.7 percent, to $13.47 yesterday in New York Stock Exchange composite trading.

Fidelity’s purchases raised its stake in GE to 172.6 million shares, making it the fifth-largest stockholder of GE.

Capital Group’s sales brought its holdings to 230 million shares as of March 31, making it GE’s fourth-ranked investor. The company had been GE’s largest stock owner on Dec. 31.

Barclays Global Investors, a unit of London-based Barclays Plc; Boston’s State Street Corp.; and Vanguard Group in Valley Forge, Pennsylvania, were the largest stockholders on March 31.

The $21.2 billion Fidelity Magellan Fund bought 39.9 million shares, a new position for the fund, Bloomberg data show.

Alexi Maravel, a spokesman for Fidelity, declined to comment on the purchases. The company manages more than $1.2 trillion.

Capital Group Sales

Three units of Capital Group — Capital World Investors, Capital Research Global Investors and Capital Guardian — each sold shares in the quarter. If Capital Group sold its shares at $11.38, the average price for the three months, the sales would have been valued at $4.3 billion.

Capital Group managed about $950 billion at the end of 2008, including $725 billion in its mutual funds, said Chuck Freadhoff, a spokesman for the firm.

Its $122.7 billion Growth Fund of America, the largest U.S. stock mutual fund, sold 68.3 million shares in the first quarter, leaving it with 20 million. Washington Mutual Investors Fund, a $43.3 billion fund, had 33 million shares after selling 71.4 million, Bloomberg data show. Freadhoff declined to comment on the share sales.

Huntington’s Sorrentino said GE’s commercial real estate portfolio remains his biggest concern.

“If the deterioration of commercial real estate abates, we could get another leg up in the stock,” he said.

To contact the reporter on this story: Charles Stein in Boston at cstein4@bloomberg.net.

Last Updated: May 19, 2009 00:01 EDT

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