Fidelity Favorites: A Look Abroad

Focus: FUNDS

Jack Bowers Image Jack Bowers Editor, Fidelity Monitor & Insight

This month, we’ve upgraded our ratings on several diversified foreign stock funds, reestablished a small stake abroad following a multi-year hiatus, asserts Jack Bowers, editor of Fidelity Monitor & Insight.

Our absence from these funds has been driven by our view that U.S. stocks have provided a more attractive risk-return opportunity — and we’ve been right!

But nine months after the surprise Brexit vote, the environment for foreign stocks has improved. More sober minds are now seeing the trade opportunities that may spring from Britain’s departure from the EU.

More broadly, Europe’s economy is picking up steam. Euro stocks are also less expensive than our own, and their performance has picked up.

These developments, coupled with concerns that U.S. growth is not accelerating fast enough, have resulted in the dollar’s relative weakness. That’s giving Fidelity’s unhedged foreign funds an added performance boost.

While we believe that U.S. stocks remain the best long-term arena for the majority of your assets, some foreign exposure may help to reduce overall portfolio risk while providing solid returns.

For the past five years, Fidelity Overseas (FOSFX) and its related share classes have been expertly run by Vincent Montemaggiore.

We have preferred his fund to other foreign large-caps as a combination of methodical stock picking (turnover is a low 33%) and country allocations that have given him an ample performance lead over his peers.

Currently, Europe (66%) and Japan (20%) are the fund’s largest regional allocations, though there’s a smattering of developed countries.