Founded over 65 years ago, Fidelity Investments is a financial powerhouse. In all, the firm has $3.5 trillion in assets under administration and serves over 20 million individual investors. Fidelity also provides services to more than 5,000 financial intermediaries.
No doubt, the core business at the firm is its mutual fund platform. There are roughly 500 offerings — with a bulk of them invested in equities. It helps that the firm has an excellent training and mentoring program for its analysts. It’s a farm system that produces top-notch money managers.
So which funds stand out? Let’s take a look:
Fidelity Contrafund (FCNTX)
When it comes to stock funds, one of the best money managers is Will Danoff. In fact, he has operated the Fidelity Contrafund (MUTF: FCNTX) for roughly 20 years. So he understands how to deal with bull and bear cycles. Keep in mind that the annual average return since 1990 is a sizzling 12.8%.
In light of this, it should be no surprise that the Contrafund has been a magnet for investor funds (assets under management are $79.4 billion). Yet, this size seems to be no hindrance for Danoff to generate nice returns. For the past year, the fund was up 14.20%.
Of course, the Contrafund has a large number of big-time companies. Some of the top holdings include Apple (NASDAQ: AAPL), Google (NASDAQ: GOOG), Berkshire Hathaway (NYSE: BRK.B, BRK.A) and Disney (NYSE: DIS). But Danoff also sprinkles some smaller companies in the portfolio.
Fidelity Capital & Income (FAGIX)
In a low rate environment, it is tough for bond funds to generate juicy returns. But there are certainly opportunities in the securities of smaller companies. These are often referred to as “high yield” bonds.
To participate in the market, there is the Fidelity Capital & Income (MUTF: FAGIX) fund. Actually, the portfolio manager, Mark Notkin, is not afraid to ramp up the risk level when he sees value. Some of his top bond holdings include GMAC, Sprint (NYSE: S) and HCA. At the same time, the fund invests a part of the portfolio in stocks.
True, the volatility can be high. But over the long run, the swings should dampen. For example, the Fidelity Capital & Income fund has posted an average annual return of 14.09% for the past three years.
Fidelity Small Cap Discovery (FSCRX)
Small cap stocks go through hot and cold streaks. They can also vary based on the investment styles – that is, value or growth.
So why not blend the two? This is the approach of the Fidelity Small Cap Discovery (MUTF: FSCRX) fund.
The flexibility has helped to stabilize returns. For example, during the 2008 financial crisis, the loss was only 27.57%, which was much better than the 37% decline in the S&P 500. Then a year later, the fund posted a gain of 50.69% and a 32.38% return in 2010.
Fidelity Diversified International (FDIVX)
So far, it’s been topsy-turvy for global markets. The Middle East is in the midst of upheaval and Japan continues to suffer from the massive earthquake and tsunami.
Despite all this, the fact remains that international investing is critical for any portfolio. And a good mutual fund for this is the Fidelity Diversified International (MUTF: FDIVX).
The portfolio manager, Bill Bower, has a good sense for value. Interestingly enough, he has had relatively light exposure to Japan.
Fidelity New Markets Income (FNMIX)
Investing in emerging markets sounds scary to many investors. Just look at the massive volatility in the Egyptian stock market lately. But emerging markets can provide substantial long-term growth for a diversified portfolio.
Although, there is a lower-risk way to play this category: investing in the bonds. And yes, one option is the Fidelity New Markets Income (MUTF: FNMIX) fund.
Consider that the fund focuses primarily on debt that is denominated in U.S. dollars. Basically, this helps to further lower the risk levels.
The fund also diversifies across various countries. Holdings are in places like Russia, Bolivia and even Lebanon.
In 2009, the fund saw a 44.56% gain and then posted a return of 10.94% in the following year.
Tom Taulli’s latest book is “All About Short Selling” and his Twitter account is @ttaulli. He does not own a position in any of the stocks named here.