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Fidelity Favorites: Focused and Leveraged
10/17/2013 9:00 am EST
With a cloud of uncertainty hanging over the equity markets, investors' appetites for certain varieties of stocks have turned on a dime. Below are updates on two of our model portfolio holdings, notes John Bonnanzio of Fidelity Monitor & Insight.
Fidelity Focused Stock (FTQGX:US)
With its sky-high turnover of 248%, its hard to pin down what manager Steven DuFour is doing from one month to the next.
After all, by that measure, about 20% of its shares are traded monthly. (If you're worried about trading costs, the fund's expenses are a competitive 0.93%, and are capped at 1.00%.)
That's all the more remarkable because, true to its name and charter, Focused has a concentrated portfolio of about 50 stocks.
And, if something sounds familiar about that, Focused is a clone of DuFour's other fund called Fifty (which is closed to new investors).
As for what he's been up to, the answer is “much of the usual”—though with a twist. Many high-frequency traders are agnostic about a company's fundamentals, and essentially buy and sell on such technicals as momentum.
But DuFour is actually a so-called GARP investor, meaning he likes growth stocks that trade at a reasonable price. “If a holding reaches its full price or my investment thesis for it changes,” he says, “I immediately rotate out.”
Case in point: of the fund's top ten holdings at the start of 2013, only two (Google and Biogen) remain. With a performance that runs hot and cold, DuFour has made hay from the energy and technology sectors, which account for only about 20% of assets.
Held in our Unique Opportunities Model, Focused is benchmarked against the S&P 500, which is up 19.8% this year. The volatile Focused has, so far, returned 25.7%.
Fidelity Leveraged Company Stock (FLVCX:US)
Although China's recent economic woes may have been overstated, manager Tom Soviero has done his level best this year to avoid stocks that might be hurt by that juggernaut's seeming slowdown.
And, like us, he's kept his portfolio US-centric, building a case for a renaissance in US manufacturing on cheap American oil and gas and “from a labor market that has seen virtually no wage increases during the past ten years.”
How is this thesis playing out in the fund? Most prominently, Tom has made consumer discretionary stocks a double-weight (26%) relative to his benchmark, the S&P 500.
Among his top holdings are Ford (F) and GM (GM), which have benefited from exceptionally low interest rates plus the normal replacement cycle of cars, which had been disrupted by the recession and falling home prices.
Having played cat-and-mouse with the S&P 500 this year (up 19.8%), through the third quarter, Leveraged Co. Stock has gained 24.4%.
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