Boston-based Fidelity Investments now manages over $5 trillion in customer assets. Yes, that’s trillion as in nine zeroes. Alhough it also has a direct investment arm and benefits management operation, it is perhaps best known for its mutual fund products.
Under the leadership of Peter Lynch, from 1977-1990, the Fidelity® Magellan® Fund (MUTF:FMAGX) grew assets under management in an unprecedented way. Since then, there have been multiple shuffles in the top fund management position. Since 2011, Jeffrey Feingold has been at the helm.
Even though FMAGX isn’t what it once was performance-wise, it is still probably the best-known Fidelity mutual fund. However, there are plenty of other Fidelity funds to pick from though, ones that I think have a better chance of longer-term outperformance.
With that in mind, here are three Fidelity funds that aren’t FMAGX.
Great Fidelity Funds: Fidelity® Event Driven Opportunities Fund (FARNX)
Net Expenses: 1.14%
Minimum Investment: $2,500
The event-driven strategy is the primary reason to pick Fidelity® Event Driven Opportunities Fund (MUTF:FARNX). In a period of ever-rising complacency, the risk of an unforeseen exogenous factor seems heightened. With this in mind, it is important to have a portfolio that is positioned to be less correlated to overall markets.
Decisions to invest are based on special situations (company reorganizations, changes in beneficial ownership, deletion from a market index, material changes in management structure or corporate strategy). Although the fund is focused on equities, it also has the mandate to invest across other parts of the capital structure i.e., debt.
Note that debt instruments that are rated below investment-grade are also investable, which is not an asset class readily available to average retail investors but can yield interesting investment opportunities. The fund is still heavily exposed to U.S. equities, but compared to other funds, diversification across sector and market cap is better.
Additionally, equity markets have been rather ebullient, which typically implies less opportunities to discover undervalued opportunities. In such an environment, portfolio managers are under pressure to remain close to fully invested so that they don’t miss out, so to speak.
But it’s in such an environment that it can be an advantage to have some extra dry powder in the form of undeployed cash to pounce when opportunities do arise, often in the form of a market correction or company-specific event. Therefore, I like seeing that FARNX has 11% cash.
Great Fidelity Funds: Fidelity Contrafund® Fund (FCNTX)
Net Expenses: 0.68%
Minimum Investment: $2,500
Fidelity Contrafund® Fund (MUTF:FCNTX) is a bit of a jack of all trades. There is no mandate to invest exclusively in a particular class or type of stock. Value, growth or some combination will populate the portfolio based on bottom-up fundamental analysis.
Fund managers gauge financial condition, earnings outlook, strategy, management, industry position and economic and market conditions to make buy and sell decisions. Additionally, there can be activity in futures markets.
Despite below par 5-year returns, which as of the end of last year have been below that of the S&P 500, year-to-date performance has been strong — 15.9% to the S&P’s 8%. Holdings that are heavily invested in the technology sector have been the major driver of good YTD numbers.
This is an appropriate choice for investors looking to get exposure to those high flying FANG stocks, but also want to sleep easy at night knowing that there’s balance. Names like Berkshire Hathaway Inc. (NYSE:BRK.A, NYSE:BRK.B) UnitedHealth Group Inc (NYSE:UNH), and Visa Inc (NYSE:V) also make it into the top 10 holdings.
Great Fidelity Funds: Fidelity® Growth Company (FDGRX)
Net Expenses: 0.77%
Minimum Investment: $2,500
Editor’s Note: This fund is currently closed to new investors.
Compared the Russell 3000 benchmark, Fidelity® Growth Company (MUTF:FDGRX) has not grown quite as much as the name would inspire investors to think. Using a similar fundamental analysis approach to the Contrafund, the fund looks for companies with above-average growth potential (normally measured by earnings or revenue).
This is a heavily weighted North American fund with 8% international exposure. When benchmarked against the Russell 2000 index, 5 year performance is flat, but the last year’s performance has outperformed on a pre-tax capital appreciation basis.
Sector allocations, predominantly technology, healthcare, and consumer cyclical all have weightings I can get behind, and that 18% weighting in healthcare should be paying off as I write this; healthcare got left behind earlier in the year but is seems to be making a comeback.
Interestingly, adidas AG (ADR) (OTCMKTS:ADDYY) and Tesla Inc (NASDAQ:TSLA) also make their way into the top 10 holdings.
As of this writing, Luce Emerson did not hold a position in any of the aforementioned securities.
