Fidelity Contrafund cuts Yahoo stake by 41 percent this year

By Reuters

Jun 02, 2014 02:08 PM EDT

(Reuters) - Fidelity Investments Contrafund, the largest mutual fund investor in Yahoo Inc, cut its stake in the Internet media company by 41 percent during the first four months of 2014, according to the fund's latest disclosure.

Contrafund portfolio manager Will Danoff had expressed confidence in Yahoo's management team at the end of the first quarter, but told Reuters in an exclusive interview in April he has been looking beyond tech companies to boost the fund's performance. Contrafund is up 1.93 percent this year, lagging the 4.97 percent return on the S&P 500 Index.

Fidelity was not available to comment.

The $108 billion Contrafund owned 24.3 million Yahoo shares at the end of April, down from 41.1 million shares at the end of 2013. In April, the fund sold about 5.3 million shares in Yahoo, an 18 percent reduction of its stake, according to Contrafund's latest disclosure.

Yahoo shares are down 14 percent this year.

The shares ranged in value during April from a high of $36.98 to a low of $32.15. The shares on Monday near midday were trading at $34.75.

Yahoo's most valuable asset is its 23 percent stake in Chinese e-commerce giant Alibaba Group Holding Ltd, whose upcoming initial public offering could raise more than $15 billion, and could potentially top the $16 billion pulled in by Facebook Inc when it listed in 2012.

The bulk of the proceeds will go to Yahoo, which bought a 40 percent stake in Alibaba in 2005 for $1 billion and which must sell more than a third of its current 22.6 percent stake through the IPO.

Analysts have noted that Yahoo's stake in Alibaba is potentially more valuable than Yahoo's current market capitalization. Alibaba's value has been pegged at more than $160 billion, which puts the value of Yahoo's stake at about $37 billion. Yahoo current has a market cap of $35 billion.

At the end of the first quarter, Danoff said he remained overweighted in Yahoo relative to the S&P 500 index "due to our confidence in management's ability to stabilize and grow the core business."

At the end of April, even with the latest round of selling, Yahoo accounted for 0.82 percent of Contrafund's holdings. Yahoo makes up 0.19 percent of the S&P 500 Index.

The mutual fund's biggest stake is in Google Inc, a Yahoo rival. Contrafund owned about $7.4 billion worth of the Google stock at the end of April, making up nearly 7 percent of its total holdings.

(Reporting by Tim McLaughlin; Editing by Richard Valdmanis and Leslie Adler)

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