UPDATE 1-Fidelity Contrafund cut Yahoo stake by 28 pct in quarter

Wed Apr 30, 2014 9:49am EDT

(Adds comments from Contrafund portfolio manager)

By Tim McLaughlin

BOSTON, April 30 (Reuters) - Fidelity Investments' Contrafund, the largest mutual fund shareholder in Yahoo Inc, slashed its stake in the Internet company by 28 percent in the first quarter, according to the fund's latest disclosure.

The $109-billion Contrafund, however, maintained an 'overweight' position in Yahoo at the end of March.

"We trimmed the fund's position, but remained overweighted relative to the index due to our confidence in management's ability to stabilize and grow the core business," portfolio manager Will Danoff said in his commentary letter.

"We viewed the company's 24-percent ownership stake in China-based Alibaba Group Holding favorably," Danoff added in his first-quarter commentary to Contrafund shareholders.

Alibaba's IPO is set to be the largest in the United States since Facebook Inc's 2012 market debut and it is the most awaited IPO in what's expected to be a record year for U.S. tech debuts.

Still, Yahoo hurt Contrafund's first-quarter performance when its shares fell on weak display-advertising results and a jump in operating expenses. Yahoo shares have fallen 11 percent this year.

Contrafund owned about 29.7 million Yahoo shares at the end of March, down from 41.1 million at the end of 2013, the fund's latest monthly holdings report showed on Wednesday.

Yahoo shares accounted for about 1 percent of Contrafund's holdings at the end of March, with a stake valued at $1.06 billion.

But Yahoo doesn't crack the fund's top 20 holdings. Danoff's biggest three bets are on Google Inc ($7.8 billion), Berkshire Hathaway Inc ($4.7 billion) and Wells Fargo & Co ($3.4 billion).

Contrafund is down 1.64 percent this year, lagging the 1.62 percent advance on the S&P 500 Index.

Danoff told Reuters on April 21 that he was looking beyond the tech sector to reinvigorate his fund's performance.

Over the past 10 years, Danoff has outperformed 94 percent of his peers in the large-cap growth fund category, according to Morningstar Inc. (Reporting by Tim McLaughlin; Editing by Bernadette Baum)

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