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Fidelity Looks Overseas
10/10/2017 5:00 am EST
The Fidelity Overseas Fund (FOSFX) seeks long-term capital appreciation, with at least 80% of assets in non-U.S. securities; the fund’s allocations are spread across a wide variety of countries and regions, observes John Persinos, editor of Investing Daily's Personal Finance.
Management calibrates weighting according to each stock’s financial fundamentals and industry standing, as well as market and economic conditions in respective locations.
As U.S. markets experience downward pressure from political turmoil and successive hurricanes, international markets are increasingly attractive for growth as well as stability. Investors skittish about U.S. prospects should look overseas for market-beating growth.
FOSFX is spread around the globe with a well-diversified mix of sectors. Europe commands the largest share of the fund’s assets, at 65.07%. Japan, which is finally enjoying the fruits of the stimulation-oriented policies of “Abenomics,” comes in second at 17.37%.
After years in the doldrums, emerging markets (2.62% of the fund’s assets) are bouncing back, thanks to population growth, higher education levels, greater technological savvy, rising commodities prices, and the expansion of a free-spending consumer class that skews toward a younger demographic.
The fund’s top five sectors by percentage of assets are financial services (23.24%), industrials (15.85%), consumer defensive (13.06%), technology (12.61%), and consumer cyclical (12.11%).
Europe in particular has emerged as a new safe haven for global investors. Investors in the euro zone are breathing a sigh of relief over the ebbing of far-right populism throughout the region.
Accelerating economic growth in the euro zone fueled by stabilizing government policies has made the Continent attractive but underappreciated.
For the first time since 2010, global growth this year has been “synchronized,” which means the spoils have been shared on a roughly equal basis in all regions.
Quickening global economic growth should provide sustained tailwinds for Fidelity Overseas Fund’s portfolio of international holdings, especially its European transnationals.
Gross domestic product growth in the euro zone in the second quarter increased 2.20% on a year-over-year basis, exceeding analyst expectations.
A similar trajectory in the region is expected for the rest of the fiscal year. According to research firm Haver Analytics, the euro zone should rack up full-year GDP growth in 2017 of at least 2.00%.
In Europe, central bankers are adopting a go-slow approach on monetary tightening, unemployment is falling, and consumers are feeling wealthier and more confident. Europe’s blue-chip transnationals are flush with cash and boast solid balance sheets, all of which bodes well for FOSFX.
The Fidelity Overseas Fund has racked up a year-to-date return of 22.10%, roughly double the year-to-date return of the S&P 500. We expect similar outperformance over the next 12 months and beyond.
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