Last month we purchased Fidelity Limited Term Bond (FJRLX) in our model portfolio. Part of our strat...
Winning with Global Small-Caps
12/17/2013 10:00 am EST
Walter Frank has added two new international small-cap mutual funds to the model portfolios at his MoneyLetter advisory. Here's an overview from the mutual fund specialist.
Fidelity International Small-Cap (FISMX) is run by three managers who each run one of the three sleeves in the fund: Europe, Middle East, and Africa (EMEA); Japan; and Asia Pacific ex-Japan.
Colin Stone, who managed the EMEA portion, looks for firms with above-average sales growth, a strong balance sheet, and ample cash flow, and where Fidelity's earnings estimates exceed the consensus.
Dale Nicholls pays careful attention to company-level fundamentals in the ex-Japan portfolio, with a focus on firms where growth potential is not reflected in valuation.
Nicolas Price manages the Japan portfolio, targeting firms with top line revenue growth, higher profit margins, and improving balance sheets.
The portfolio has a hefty 27% of assets in Japan, well-above the 18% average for foreign small- and mid-cap growth funds. That means the performance of the Japanese market can heavily influence the fund.
Meanwhile, the fund also is less committed to emerging markets than its peers, and has a decidedly lower average market cap. Performance this year, up 30.3%, bests 93% of its peers.
Oakmark is known as a value shop, and the managers at Oakmark Global (OARGX:US) adhere to the firm's penchant for firms selling at a significant discount to their intrinsic value estimate.
Clyde McGregor manages the US portion of the portfolio, while Bob Taylor manages the international portion. As with other Oakmark funds, this is a portfolio that is concentrated in the pair's best ideas—36% of assets are invested in the top ten stocks.
The portfolio is overweight in Japan, compared to both its benchmark, and world stock category, and underweight in the UK.
By sector, the fund's greatest over-weightings are in basic materials, industrials, and technology, while it has less in consumer defensive and health care, versus its peers.
Marching to its own drummer has paid off over the long haul. From its 1999 inception, the fund has a 12% compound annualized rate of return, compared to 4% for the MSCI World index. This year, the fund bests 94% of its peers with a 29.5% return.
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