2015 is shaping up to be a tricky year for investors. But buying the best Fidelity funds will help you profit from 2015’s twists and turns.
Heading into a new year after as many record highs in the S&P 500 as has ever been the case, investors are rightly nervous about whether valuations here are too sky-high. At the same time, the fear of what to do if and when our Federal Reserve begins to raise rates has both amateur and professional investors struggling to find ways to generate income that don’t put their overall savings in harm’s way.
As if concerns over valuations and rising rates weren’t enough, you can add straws like geopolitical risk, domestic political squabbling, Japan in recession and Europe on the cusp of one to our camel’s back.
But fear not. My list of the best Fidelity funds for 2015 is designed to help you complement your existing portfolio or deliver a standalone portfolio that both runs the gamut and still delivers reasonable returns.
Before I get to my picks, let me state unabashedly and categorically that I invest in actively managed funds for three reasons: (1) My chosen active managers tend to beat their benchmarks in both bull and bear markets. (2) Fidelity’s low-cost, no-load, shareholder-focused lineup is second to none. (3) The best way to own any ETF (including Fidelity’s own commission free offerings) is only in tandem with a superior actively managed fund. In the topsy-turvy marketplace of 2015, having the following Fidelity experts help you pursue growth and income investments at home and globally isn’t just recommended. I think it’s required.
Now, let’s look at the best Fidelity funds for 2015, including what I believe to be their hidden strengths:
Best Fidelity Funds for 2015: Mega Cap Stock (FGRTX)
Click to Enlarge Expenses: 0.68%
A lot of funds out there sound like they’re buying the biggest, bluest-chip, battleship-balance-sheet multinationals, but few — including the S&P 500 — actually do just that.
Not so with Fidelity Mega Cap Stock Fund (FGRTX).
Manager Matthew Fruhan invests more than 70% of the fund in companies with true mega-cap capitalizations that offer more cash in the coffers than many governments, the added bonus of Texas-sized dividend producing, more cash than they can count let alone spend … before you even get to return potential. That includes such cash-rich names as Apple Inc. (AAPL) and Microsoft Corporation (MSFT).
Speaking of return potential, the truly largest-cap companies that Matt invests in have seen a slight underperformance in 2014 relative to the more diversified S&P 500 benchmark index, owing in large measure to the weakness in global marketplaces beyond our own pale.
Looking to 2015, I expect Europe and Japan to remain volatile but on a mending trend, which should bode well for those economies and markets and, by extension, those companies that are best positioned to cater to them.
Hidden Strength: Of course, there could be the possible headwind of a strengthening dollar here that could impact scale of sales over there — but I’m not forecasting a radical 2015 strengthening of the greenback. Besides, Fruhan’s hidden strength is that he can reach across the pond and invest in non-U.S. blue chip battleships to both pursue gains and defend against any toll that a strengthening dollar might take.
Minimum initial investment for FGRTX and all the other Fidelity funds I’ll discuss is just $2,500.
Best Fidelity Funds for 2015: Low-Priced Stock (FLPSX)
Click to Enlarge Expenses: 0.82%
Intelligent. Inimitable. Head and shoulders above even the best crop of money management giants you can name or find, Joel Tillinghast invests in “low-priced stocks,” which are stocks that are currently selling for $35 or less.
While that may sound gimmicky, it’s the secret sauce to Fidelity Low-Priced Stock Fund’s (FLPSX) beefy historical returns, and was Joel’s brainchild when he created and launched the fund way back December 1989. Right now, that translates into top holdings such as UnitedHealth Group Inc. (UNH) and Seagate Technology plc (STX).
The fund has a market value of more than $30 billion, leading some reporters to write stories about how FLPSX is too big to succeed.
One, three, five, 10, 15, 20 years … you name the frame, and it’s clear that Joel is leading one of the best Fidelity funds out there.
Joel is a stock picker’s stock picker; if he’s around the water cooler, other managers are keen to hear what he has to say. While unsung by the media, he is a manager that compares with Peter Lynch, his mentor while Joel was learning the trade. His stealth advantage: He’s always been a global investor. I continue to think the best way to pursue foreign stock opportunities is through managers with longstanding expertise in the foreign stock arena as part and parcel of the global funds, such as Joel Tillinghast and Low-Priced Stock.
Hidden Strength: Joel’s long-term stealth advantage is that he’s always been a global investor; more than a third of his fund’s holdings are from foreign markets. In 2015, I continue to think the best way to pursue foreign stock opportunities is through managers with longstanding expertise in the foreign stock arena. His near-term hidden strength is that while the fund is currently in a mid-cap tilt, it also can lean toward even mega-caps in ultra-bear markets (like the one we got in 2008) when even the biggest names are selling below $35 and no one but Joel is buying.
Best Fidelity Funds for 2015: Strategic Dividend & Income (FSDIX)
Click to Enlarge Expenses: 0.77%
Income investors need three types of income. They need to have good bond income, some inflation protection and non-bond income in the form of a less interest-rate-sensitive capital appreciation opportunity.
That’s where Fidelity Strategic Dividend & Income Fund (FSDIX) could play a unique and very interesting 2015 role.
Manager Joanna Bewick invests in a mix of approximately 50% stocks, 15% real estate investments, 15% convertible securities and 20% preferred stocks.
FSDIX is unique in the industry and benefits mightily from the fact that Joanna compares and culls the best and brightest ideas from Fidelity’s cadre of equity and income analysts while simultaneously overseeing sub-managers whose expertise in their sleeves helps weave an improving performance pattern.
FSDIX began trading in December 2003 and has a market value of more than $4 billion. The seasoned management team consists of Joanna (team leader since 4/1/2008), Ford O’Neil since (6/1/2012), Adam Kramer (since 8/1/2007), Scott Offen (since 7/26/2006), and Samuel J Wald (since 12/31/2003).
Hidden Strength: 2015 growth and income investors should combine Joanna’s three Strategic Fidelity funds — FSDIX, Fidelity Strategic Income Fund (FSICX) and Fidelity Strategic Real Return Fund (FSRRX) — in a 65/20/15 split to create a smartly diversified strategic dividend and income portfolio.
Best Fidelity Funds for 2015: International Growth (FIGFX)
Click to Enlarge Expenses: 1.13%
In 2015, I’m rationally optimistic about a turnaround in the at least some of the economies inside the eurozone. I know the hue and cry is for irrecoverable recession — but my Fidelity Investor members know that I have (and continue to) forecast a mild and recoverable recession in the eurozone and in Japan, with market gains having a higher probability in 2015.
If I like Europe and Japan, I like manager Jed Weiss more; I wouldn’t want any of my investment dollars wandering around that continent or island without his Rick Stevens-like stock picking guidance. (Traveling to Europe by way of an index fund means you get all the risks and whatever returns there may be — in my book, that’s kin to thinking that The Accidental Tourist is a fact-based guidebook rather than a (good) work of fiction.)
Fidelity International Growth Fund (FIGFX) is one of the best Fidelity funds to own if you’re looking for global exposure. FIGFX invests in companies from around the globe that Jed thinks have above-average potential for growth, such as Roche Holding Ltd. (ADR) (RHHBY) and Nestle SA (NSRGY). Jed looks for multiyear structural growth stories and high-barriers-to-entry businesses at attractive valuations on his earnings forecast. After a rough year in 2014, attractive valuations relative to our own marketplace and on a historical and absolute basis abound.
Jed also looks for multiyear structural growth stories and high barriers to entry businesses at attractive valuations on his earnings forecast.
FIGFX began trading in November 2007 and, for Fidelity, is a smallish fund with a market value of under $1 billion.
Hidden Strength: FIGFX isn’t a cyclical-based value fund, but a fund that pursues hidden values; rubies among the rubble. While eurozone growth stocks bore the brunt of the 2014 blow, they did so more in sympathy with momentum pessimism rather than their fundamentals, which sets the stage for some outperformance in 2015.
Best Fidelity Funds for 2015: Select Healthcare (FSPHX)
Click to Enlarge Expenses: 0.77%
Spoiler alert: Healthcare is my biggest 2015 sector overweight in my Fidelity Investor core, diversified portfolios.
News flash: Fidelity has more than 40 actively managed sector funds, known as Select funds. My complementary service, Fidelity Sector Investor, has a longstanding track record of using these sector funds for moderately more active traders. I prefer them to single stocks by a wide margin — you get diversification away from one stock and the active management expertise to ride the industry story that the sector fund is focused on … all in the hands of someone whose career depends upon beating peer products and benchmarks.
With Fidelity Select Health Care Portfolio (FSPHX), Eddie Yoon invests in companies somehow involved in healthcare products and services, be it pharmaceuticals, biotechs or even administrative companies. This includes holdings such as Actavis plc (ACT) and McKesson Corporation (MCK), among others. FSPHX began trading in July 1981 and has a market value of almost $9 billion.
I like FSPHX as one of the best Fidelity funds for 2015 for reasons that follow a refrain that is familiar to my members: healthcare provides necessary goods and services for a world’s worth of demographics whose aging populations (or groups within them) demands for less invasive ways to stay active longer is growing.
But like the Geico commercial, I hear you saying, “Everybody knows that.” Well, did you know that neither all the political folderol over healthcare nor all the gimcrackery over patent expirations did anything to derail years of lower risk and higher return gains compared to the S&P 500?
Now you know.
Hidden Strength: Eddie invests with an eye on the necessary demographic trends and stories of aging boomers here and globally, but he also is keyed into a trend we were first to note years back: emerging markets are minting a new class of new consumers demanding not just better food and shelter, but better healthcare. That’s a healthy growth story that makes healthcare a no-brainer.