After enduring a brutal downturn in 2008, investors who stuck with Fidelity Investments' storied Magellan mutual fund have been rewarded with much improved performance.

The $18.6 billion fund nearly cut investors' money in half last year, far outpacing steep declines in the broader market. Backfiring bets on technology and financial stocks were major culprits, and fund manager Harry Lange acknowledged in a late-November shareholder update that he underestimated potential damage from the housing bust and credit crisis.

The new year has cast his moves in better light. Through Thursday, this year's total return for Magellan is a positive 10.6%, according to Morningstar.com, easily topping an S&P 500 that is still down on the year despite the market's recent rally.

Not much has changed at the fund, but the market has shifted into a gear that better suits Lange's growth-oriented investing style, according to Christopher Davis, the lead fidelity analyst at Morningstar.

Lange's top pick, Corning Inc. (GLW), has been a major boon for the fund in recent months, and Magellan has also benefited from improvements in tech stocks such as Apple Inc. (AAPL), Oracle Corp. (ORCL) and Cisco Systems Inc (CSCO).

"Things that were disastrous last year have been really helpful this year," Davis said.

Take Corning. The maker of glass for flat-panel TVs, Magellan's top stock, saw its stock price plummet 60% last year. But it started to change course over the winter, and it's up more than 53% this year through Thursday. Among the tech stocks, Oracle is up 9.1%, Apple is up 47.4%, Cisco has improved by 18.5%, and Google Inc. (GOOG) - another big Magellan holding - is up almost 29%.

Lange, in an interview, highlighted his fund's exposure to consumer spending in technology, which he thinks is improving well ahead of industrial and corporate spending.

Outside of tech stocks, Magellan has also benefited from consolidation among drug makers. Biotech heavyweight Genentech Inc. (DNA) was a major holding that is being taken over by Roche Holding AG (RHHBY). A lesser pick in the fund, drug-maker Wyeth (WYE), is in a buyout deal with Pfizer Inc (PFE).

Some bad bets in financial stocks don't have much opportunity for redemption. A big investment made in insurer American International Group Inc. (AIG) last year, for example, made shortly before it almost imploded ahead of massive government intervention, didn't work well.

Still, Lange said the fund's financial performance has "probably been net positive" this year. The haze in that sector is starting to lift, he said.

New Fidelity data show Magellan picked up a big stake in conglomerate General Electric (GE) - a stock Lange avoided last year - in March. While down on the year, GE shares rose 19% in March and then gained 25% in April.

"While I think it could take a while to work through our difficulties here in the United States, it's often when sentiment is gloomiest that you find the best bargains," Lange told shareholders in November.

Aside from bargain-hunting, he noted on Friday that he likes to stick for the long-term with companies he thinks are number one stocks in the industry. "That's kind of my style."

Despite Magellan's recent rise, the fund is far from what it was a decade or so ago, when it was among the world's biggest funds and investors closely monitored its investing moves. Morningstar's Davis has recommended Fidelity's $45.4 billion Contrafund as a better option for investors looking for a big, diversified fund as a "core" holding.

Magellan has far outpaced Contrafund this year, although Contrafund's roughly break-even performance has still bested the S&P 500. Contrafund also had a better year than Magellan last year, although it also sank sharply. Morningstar rates Magellan with two stars, but gives Contrafund the full five.

-By Jon Kamp, Dow Jones Newswires; 617-654-6728; jon.kamp@dowjones.com