The late 1990s were an exciting time for investors. Money flowed into mutual funds, especially those with strong track records and recognizable brand names. At the time, Fidelity Magellan (FUND:FMAGX) was one of the brightest stars in the fund world. However, the fund soon fell on hard times, losing ground to the broader market and watching its assets dwindle. But with a new manager at the helm and a surprisingly robust second-quarter showing, is Magellan finally back on track?

Highs and lows
Fidelity Magellan posted an impressive run back in the '90s, returning a cumulative 466% during that decade. Assets blossomed to more than $100 billion by the end of 1999. But over the next three years of bear markets, the fund lost 38% of its value, and net redemptions reduced assets under management by nearly one-half.

Moreover, Magellan's troubles didn't end once the market rebounded. The fund continued to lag the S&P 500 in every following calendar year except one, including 2006, when it trailed the index by almost 9%. Investors soon became frustrated with the fund's lackluster performance record and started pulling their money out.

In an effort to breathe some life back into its flagship fund, Fidelity announced a manager change in October 2005. Harry Lange, who had built a solid track record with the Fidelity Capital Appreciation Fund, would replace longtime manager Robert Stansky.

With Lange's arrival, Magellan underwent some substantial alterations. The fund became more growth-oriented, stacking up heavily on technology stocks. Lange prefers fast-growing companies that top their respective industries, but he also keeps an eye on valuation. Currently, the fund holds almost one-third of its assets in the technology sector, including Nokia (NYSE:NOK), Corning (NYSE:GLW), and Google (NASDAQ:GOOG).

It had a subpar showing last year, but 2007 has been better for Magellan. The fund has posted a 10.8% year-to-date return through June, including an impressive 8.6% return in the second quarter alone. Such strong performance has some folks predicting a comeback for this venerable fund. If the long-awaited rebound in growth stocks does materialize, Magellan could do quite well. Does that mean now is a good time to own this fund?

To hold or not to hold
Since Fidelity Magellan has been closed to new investors for many years now, buying into the fund is difficult. If it's available within your 401(k) plan, you probably have the option to transfer money into it -- but I wouldn't necessarily recommend that.

True, the fund has made some substantial changes to its investment process, and it's emerged much more growth-oriented. But it's still a bit early to know whether Lange's stock-picking success with other Fidelity funds can translate into success at Magellan. Part of Lange's skill lay in picking small- and mid-cap stocks in the Fidelity Capital Appreciation Fund. He can't do so quite as easily at Magellan, because of its large asset base.

Wait and see
You should always be wary of a fund that makes significant changes to its process and overall character. While the move to a more growth-oriented portfolio may prove wise, this strategy is still rather untested at Magellan. As such, the fund lacks two of the most basic characteristics of a good mutual fund -- a long-tenured manager and a long history of a consistent investment process. Adding greater exposure to growth-oriented mutual funds right now may be a good idea, but Magellan might not be your best source.

What about those fundholders who already own the Magellan fund? Current shareholders, sit tight. There's no compelling reason to sell out if you haven't done so already. If you are a longtime shareholder, you've likely experienced some ups and downs with this fund, and are looking for some vindication. Magellan could do very nicely indeed if both large-cap stocks and growth stocks make a comeback.

From Fidelity Magellan, we can learn that great funds sometimes become not-so-great -- but also have the potential to become great once again. Fools, stay on top of your mutual funds, and remain aware of any management or process changes. Keep an eye on performance, and don't be afraid to bail if your fund falls short year after year for no good reason. Time will tell how Magellan fares with its new focus; if you own the fund, watch it carefully, and keep it on a short leash.

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Fool contributor Amanda Kish lives in Rochester, N.Y., and does not own shares of any of the companies or funds mentioned herein. The Fool's disclosure policy keeps an eye on the horizon.