(MONEY Magazine) – Snuffed out. That's what happened to the returns of some top growth funds when one of their biggest holdings, Philip Morris, with more than $42 billion of shares outstanding, fizzled by 23% on April 2. The tobacco and food conglomerate got burned when it surprised investors by announcing it would slash the price of its premium-brand Marlboro cigarettes, as well as other brands, by as much as 40 cents a pack to stave off worrisome market share losses to $1-a-pack generics. Still, not everyone was shocked by the news. A few smart fund managers, including Jeffrey Vinik of Fidelity's $25 billion Magellan and Ken Heebner of $650 million CGM Mutual, saw the trouble coming long ago. They rode Philip Morris for total gains of as much as 150% over the past several years and ducked out a few months before the boom was lowered. Moreover, the best of these fleet-footed few, cited in the table on page 50, have already moved into an exciting new generation of blue chips. These managers are out in front of what many Wall Streeters think is a major shift in stock market leadership. The Philip Morris meltdown was just one more sign, say these pros, of the end to the longstanding and virtually unchallenged power of many big consumer companies to aggressively raise prices on their most famous brands. Today's market leadership has shifted to a rising class of blue-chip performers that don't need to continually raise prices to increase profits. Fidelity's Vinik, for example, began pruning Magellan of vulnerable consumer stocks soon after he took over the fund in July 1992. High on the 34-year-old's sell list were Magellan's nearly 10 million Philip Morris shares. By the end of the year -- and months before ''Marlboro Friday'' -- the fund held none of the stock. So what is Vinik buying now? He's loading up on companies that should benefit from a strengthening U.S. economy. The $37-billion-a-year automaker Chrysler is on the list, as is $13.3 billion semiconductor giant Motorola. Hardly the old-style blue chip, with steady growth and minimum swings in earnings, you say? True enough. But these stocks have the most important attribute of the new-age blue chips: a bright-looking future. Both companies are enjoying strong customer demand for their products and rapid earnings growth. Ken Heebner, 52, handles three funds, among them the top performers in two different categories for the past 10 years. His $425 million CGM Capital Development (closed to new investors) outshone all growth funds with a 20.3% annual gain over the past 10 years, and his balanced fund, $650 million CGM Mutual (still open), turned in 16.1% a year over the same period, compared with 12.2% for the average equity fund impressive performance, some are calling him the new Peter Lynch. Late last year, Heebner dumped his entire holding of Philip Morris -- a combined 4.4 million shares spread over the portfolios that he manages -- and moved heavily into stocks that would benefit from economic recovery, including Chrysler and Ford. Vanguard's $6.6 billion Wellington Fund held 750,000 shares of Philip Morris stock earlier this year. Manager Vincent Bajakian, 62, ultimately reduced the holding from about 1% of the fund's assets to less than 0.5%. Wellington -- like Magellan and CGM Mutual -- has opted for cyclical stocks, such as aluminum maker Alcoa, with $9.5 billion in sales, and Georgia Pacific, with $12 billion. Both should benefit greatly from economic recovery. Some growth funds are required by their charter to stick mainly with companies that sport above-average long-term earnings growth rates. But that didn't keep the managers of $2.2 billion Fidelity Growth Company and $3 billion IDS New Dimensions -- two funds with such restrictions -- from finding suitable replacements for their Philip Morris shares. IDS manager Gordon Fines, 48, and Fidelity Growth manager Robert Stansky, 37, both moved out of Philip Morris early and are now holding big positions in Microsoft, which analysts believe can maintain more than 25% earnings growth over the next five years. Fines has 3% of his portfolio in the software stock and Stansky has 1%. Says Fines: ''At this stage we want companies that are not dependent on price increases for earnings growth but continually sell more units of their product over time.'' It sure seems that these funds can keep smokin' without the help of tobacco stocks.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: FUNDS THAT OWN THE NEW MARKET LEADERS The funds listed below saw trouble ahead for Philip Morris and got out ahead of the stock's 23% dive on ''Marlboro Friday.'' These managers are now loaded up on stocks that benefit from economic recovery and do not depend on steady price increases to generate strong profit growth.