Fidelity mutual funds are some of the most popular investments out there. Take Fidelity Contrafund (FCNTX) — it’s one of the top 10 largest mutual funds by assets, with over $68 billion in assets under management.
Other popular Fidelity investment options include the Fidelity Low-Priced Stock Fund (FLPSX) and Fidelity Growth Company Fund (FDGRX) with about $29 billion and $26 billion in assets, respectively.
But when picking the best Fidelity funds, size isn’t always the best measuring stick. Sure, FCNTX is big for a reason and Fidelity Contrafund has a big following on Wall Street … but there are also a host of impressive Fidelity investment options out there that may not be as well-known.
Similarly, the best Fidelity funds for 2014 and beyond may not necessarily be the best investments so far in 2013.
Take the Fidelity New Markets Income Fund (FNMIX); this emerging markets mutual fund is down 9% as domestic stocks have surged this year. But if next year is a big year for global investments and a bad year for the U.S.? Well, going forward FNMIX could be the best Fidelity fund to put in your portfolio right now.
All this is a long way of saying that what’s hot now may not be hot tomorrow – so investors need to do more than just look at performance or assets alone when picking the best Fidelity funds for their portfolio.
So to help, here’s a list of 5 top Fidelity investments for long-term portfolios:
Fidelity Low-Priced Stock Fund
- Ticker: FLPSX
- Assets: $28.7 billion
- Category: Mid-cap stocks
- YTD Performance: 28.8% vs. 23.1% for the S&P 500
- Expense Ratio: 0.80%
One of the best Fidelity investment options out there for those looking at growth stocks is the Fidelity Low-Priced Stock Fund (FLPSX).
For the record, I am not a big advocate of shopping for “cheap’ stocks based on their nominal share price. Plenty of $5 stocks can go to $4 in a hurry, and plenty of $50 stocks can go to $60 just as fast.
But it’s undeniable that when it comes to playing the low-priced stock space, FLPSX is at the top of its game.
A half dozen managers invest the lion’s share of this fund’s cash in stocks that trade under $35 a share. Of course, over time those stocks may grow to a higher price point – which is a good thing for FLPSX investors – but the starting point is normally much cheaper.
Top holdings right now include United Health Group (UNH), Seagate Technology (STX) and Microsoft (MSFT). These three stocks that lead the Fidelity Low-Priced Stock Fund are no longer under $35, but frankly that’s a testament to the ability of these managers to pick investments that will grow.
Consumer discretionary stocks make up about 25% of the fund, and after that information technology comes in at No. 2 with about 17% of assets in this sector.
- Ticker: FCNTX
- Assets: $68.7 billion
- Category: Large-Cap Growth
- YTD Performance: 25.7% vs. 23.1% for the S&P 500
- Expense Ratio: 0.74%
One of the most widely held Fidelity funds out there – and frankly, one of the most famous mutual funds of all time – is the Fidelity Contrafund (FCNTX). This mega mutual fund boasts over $68.6 billion in total assets, and while some folks think this Fidelity investment is too big to be effective, the performance in 2013 shows FCNTX can still outperform its peers.
Fidelity funds manager William Danoff has been at the helm of this flagship investment since 1990, with decades of success that keep coming; Fidelity Contrafund has a strategy that focuses on actively managed investing based on the large-cap funds with the most upside potential.
Right now, top Fidelity Contrafund investments include Google (GOOG), Berkshire Hathaway (BRK.A) and Apple (AAPL). Top sectors right now are tech, with 25% of assets allocated in this sector, and consumer discretionary plays, with another 20% in that segment.
Fidelity Growth Company Fund
- Ticker: FDGRX
- Assets: $25.7 billion
- Category: Large-Cap Growth
- YTD Performance: 31.9% vs. 23.1% for the S&P 500
- Expense Ratio: 0.90%
One of the best Fidelity Funds after Contrafund is the Fidelity Growth Company Fund (FDGRX), a large-cap fund that is even more aggressive with its pursuit of growth.
Manager Steven Wymer is an old hand, serving as the leader of this fund since 1997, and has a great track record of picking the blue-chips with the biggest potential.
The proof is in the performance, with this large-cap fund tacking on a stupendous gain of almost 32% year-to-date in 2013 thanks to performance of top holdings like Facebook (FB) and Gilead Sciences (GILD), both of which are up by about 90% this year.
Top sectors right now are technology and healthcare, with over half the portfolio in those two segments, since that’s where Wymer sees the biggest growth in 2014.
Fidelity New Markets Income Fund
- Ticker: FNMIX
- Assets: $4.9 billion
- Category: International Bonds
- YTD Performance: -4.5% vs. 23.1% for the S&P 500
- Expense Ratio: 0.87%
Let’s face it, there aren’t a lot of bond investments that are incredibly attractive out there. But for income-oriented investors looking for the best Fidelity funds right now, one opportunity to consider is the Fidelity New Markets Income Fund (FNMIX), which consists largely in emerging-market debt.
Investing in emerging markets is always difficult and frankly hasn’t been very lucrative in 2013 as the domestic equity market has been on a tear.
However, if you’re talking about a play for 2014 and beyond, then you may want to consider taking a position in the Fidelity New Markets Income Fund – particularly if you have an eye on yield.
After all, across the last 10 years this fund has delivered 9.5% returns annually – almost on par with large-cap equity – thanks to big returns from the underlying debt securities. Right now, for instance, FNMIX has a 30-day yield of over 5% thanks to debt in Eastern European governments, Brazilian oil giant Petrobras (PBR) and other emerging-market instruments.
Right now about 50% of the fund is in sovereign debt, with another 40% in corporate and agency debt. A tiny fraction is in equities and U.S. Treasuries, with about 9% in cash as of this writing.
Fidelity Select Health Care Portfolio
- Ticker: FSPHX
- Assets: $3.9 billion
- Category: Large-Cap Growth
- YTD Performance: 43.8% vs. 23.1% for the S&P 500
- Expense Ratio: 0.79%
Investors looking to play stocks but with an eye toward sector-weighting should consider the Fidelity Select Health Care (FSPHX). After all, healthcare is a recession-proof sector that is seeing big growth thanks to both the aging Baby Boomers fueling a demographic push and because of the Affordable Care Act giving more uninsured Americans access to healthcare – and thus, treatments.
Top holdings right now are Amgen (AMGN), Actavis (ACT) and Gilead Sciences (GILD) – stocks that are up 35%, 72% and 89% respectively YTD.
The stock obviously weights its portfolio to healthcare stocks, but also isn’t afraid to make big bets on individual players. Right now 41% of total assets are in the top 10 holdings alone – which has resulted in mammoth outperformance that has doubled the S&P 500 year-to-date, but can quickly turn the other way if those major holdings head south.
But that’s the bet you’re making with Fidelity Select Healthcare, and thus far it has been a very profitable one for investors.
Given the demographic changes afoot in America, it seems unlikely that FSPHX will crash anytime soon – and given the tremendous performance in 2013, the upside potential of this Fidelity fund should be clear.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at email@example.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.