Good funds can help investors play broad trends in the market while diversifying their risk, especially when they're actively managed by top professionals, writes Jim Lowell of Fidelity Investor.
As I continue to wade through the economic issues that underlie market themes, I’m never not thinking about our brick-and-mortar holdings. This month, I spotlight holdings in my fundamentally derived portfolios.
Cash Reserves (FDRXX)
My go-to source for both defense and, in a rising rate environment, offense. Right now, betwixt recovering and recovery, the buffer role this fund plays still makes sense, even though the yield is a sip shy of a dry gulch.
Manager Robert Litterst has been managing this money market fund since 2004. It began trading in May 1979, and has a market value of over $120 billion.
The remarkable thing about manager William Danoff is his ability to deliver the goods despite the size of his fund and the interesting times in which we live.
Contrarian investing may not have been his invention, but he’s clearly a master of it. By investing in under-researched, overlooked, undervalued and/or underappreciated companies, he presents the case for active management better than most.
Contra began trading in May 1967, the brainchild of its first manager, Leo Dworsky, and has a market value of close to $55 billion. Foreign investments make up 15% of the holdings.
The top three sectors are information technology (29%), consumer discretionary (21%), and health care (10%). The top ten holdings are Apple, Google, Berkshire Hathaway, McDonalds, Coca Cola, Nobile Energy, Walt Disney, TJX Companies, Wells Fargo, and Nike.
Equity Income II (FEQTX)
Revamped, revised, re-envisioned, and officially renamed Fidelity Equity Dividend Income Fund, manager Scott Offen invests in income-producing investments, which leads to a large cap value tilt and (finally) a dividend focus. Offen’s the right manager for the job, and this fund plays a smoothing role in our stock allocations.
It began trading in August 1990 and has a market value of over $4 billion. Foreign investments make up 10% of the holdings.
The top three sectors are consumer staples (15%), financials (14.5%), and industrials (13%). The top ten holdings are Exxon Mobil, GE, Proctor & Gamble, Chevron, Merck, AT&T, McDonalds, JPMorgan Chase, Coca Cola, and Microsoft.
Floating Rate High Income (FFRHX)
Floating rates got sunk and we got skunked in 2008. But the fund still helped stave off worse overall returns, and since then has been rebuilding the case for owning it. We won’t rest easy until the case is proven even ahead of a rising rate environment, something our Fed tells us we won’t have to contend with for years to come.
Manager Christine McConnell invests at least 80% in floating rate loans and other floating rate investments. It began trading in August 2000 and has a market value of over $5.2 billion. Foreign investments make up 7.2% of the holdings.
Focused Stock (FTQGX)
Manager Stephen DuFour runs one of the most concentrated Fidelity funds, focusing on large-cap growth and value companies. It began trading in November 1996 and has a market value of $560 million.
It’s a US-centric play. Foreign investments make up 9.1% of the holdings.
The top three sectors are information technology (23.6%), energy (16%), and health care (15.3%)...but this fund’s fate is all about its picks. The top ten holdings are Exxon Mobil, Keyera, Intuit, MasterCard, Union Pacific, Citrix Systems, Fifth Third Bancorp, Apple, Perrigo, and Edwards Lifesciences.
High Income (SPHIX)
Manager Fred Hoff invests in lower-quality junk bond investments. Junk bonds remain my preferred chicken-hearted approach to the stock market and my preferred way to diversify for yield in the bond market. While junk bonds are not without their risks, experienced, expert management and diversification here mollify them.
It began trading in August 1990, and has a market value of over $4.7 billion. Foreign investments make up 10% of the holdings.