Fidelity Dividend: Quality and Growth

10/22/2014 8:00 am EST


Walter Frank


The latest addition to our model portfolios is a fund from Fidelity that is currently undergoing a transition, explains Walter Frank, fund expert and editor of MoneyLetter.

As of the first of this year, Ramona Persaud replaced Larry Rakers as manager of Fidelity Dividend Growth (FDGFX). Beginning last October, the two worked together to reshape the portfolio.

Under Rakers, the fund contained 400 to 500 stocks in all capitalization ranges. Rakers kept sector weightings near that of the S&P 500 (SPX) but his emphasis on value stocks led to more cyclically-oriented fare in the portfolio.

Under Persaud, the fund's portfolio has been trimmed to about 130 holdings, with a lower turnover rates. The fund also tends to hold larger and more concentrated positions. 23% of assets are in its top ten holdings.

Persaud uses a bottoms-up stock selection process, with an emphasis on purchasing quality stocks at reasonable valuations.

Stocks generally fall into one of three situations: classic dividend growers, accelerating cash return, and opportunistic holdings and special situations.

Strong picks in technology and healthcare have helped propel the fund this year (up 7.7% through October 3). Apple (AAPL) and Microsoft (MSFT) have been standouts, both advancing about 25%.

Healthcare winners include Johnson & Johnson (JNJ), Amgen (AMGN), and Merck (MRK).

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