SOUTH FOR THE WINTER?

WHEREVER MAGELLAN GOES, PEOPLE follow. America's largest mutual fund, with $53 billion in assets, is so big that it creates a wavelike surge in share prices on its shopping trips through the stock market. In the days of the legendary Peter Lynch, who averaged a 29% return from 1977 to 1990, the fund spread the money widely, typically carrying about 1,400 stocks in such traditional industries as retailing and banking. But now Magellan is steered by Jeffrey Vinik, 36, who is managing a fund that is five times the size of the one Lynch left behind. And Vinik is doing boffo, posting a return of better than 38% so far this year. But Vinik is raising eyebrows, not only because he tends to concentrate so much money on less than 500 stocks. Vinik is in love with technology. Earlier this year, as much as 40% of Magellan was in tech stocks.

The very size of Magellan has helped propel a technology-stock boom that some investors believe is due for a bust. Mutual funds that invest solely in computer and electronics companies have enjoyed returns of as much as 50% to 70% so far this year. But the sound of bursting bubbles echoed last week after Smith Barney technology analyst Jonathan Cohen questioned the high prices of some of the most speculative offerings on the NASDAQ exchange. Netscape, which traded as high as 161 that day, fell 28 3/4 points when Smith Barney said the Internet software company was probably worth 55 a share at most, labeled it speculative and recommended that investors sell. The astronomical market values of technology shares "are absolutely insane," says Michael Metz, chief investment strategist for Oppenheimer & Co. "It is going to come to no good. A lot of professionals desperate to get performance are putting money in these stocks. They don't realize that the accident or fatality rate in technology is very high."

But so is the potential for big payoffs. And many investors see good reason to believe they will keep on coming. Says Duncan Richardson, a portfolio manager with Eaton Vance of Boston: "We're in a world of single-digit growth. If you find an investment north of 15% a year, you're probably looking to a technology company." Byron Wien, a managing director of Morgan Stanley, feels the technology group is in a long-term growth phase rather than the kind of boomlet experienced by energy and casino stocks in the late 1970s. Mutual-fund managers with big investments in technology insist the industry has grown so big and diverse that it's unlikely to go bust all at once. Such companies include those that offer services on the Internet (for example, America Online), semiconductors (Micron Technology), hardware (Motorola) and software (Microsoft).

Yet investors who buy individual stocks rather than diversified funds can watch fortunes change in minutes. Netscape had been up 24 points early in the week, when it was hit by a double whammy: the Smith Barney evaluation and the appearance of a new favorite. On Thursday, Microsoft announced it was adopting the Java programming language designed for the Internet by Sun Microsystems. The market saw it as a threat to Netscape, and the stock tumbled. Meanwhile, Sun Microsystems closed up 33/8, at 93-1/8. Still, Netscape has its defenders. Says Wien: "When any stock has done as well as Netscape over such a short period, any piece of bad news will have an impact. Anybody who owns these stocks has to be prepared for exceptional volatility."