On August 1, Fidelity took direct aim at index fund competitors Vanguard, Blackrock’s iShares ...
Low-Priced Stock: Bet on Joel and Co.
10/15/2015 9:00 am EST
We’ve had a few reasons for hesitating to recommend one of the fund industry’s most successful funds, explains Jack Bowers, editor Fidelity Monitor & Insight.
The first reason for our previous hesitation is that Fidelity Low-Priced Stock (FLPSX) has a large (36%) foreign stake and, worse, the manager’s 7% allocation to vulnerable emerging markets.
We should add to our list, the fund’s nearly 10% stake in cash, but truth be told, cash has been a helpful cushion over the past two turbulent months (as well as the past 25 years).
That legendary manager Joel Tillinghast is successfully tacking into a strong and shifting headwind (where small-cap stocks are often lagging larger-caps and value stocks have often taken a back seat to growth stocks) should, however, surprise no one, least of all ourselves.
Let’s also give some credit here to Joel’s dedicated team of analysts and managers who started running a small portion of the mid-cap value fund during his 2011 leave of absence.
While the fund’s year-to-date returns are, in absolute terms, unimpressive, relative to his peers and his official Russell 2000 benchmark, Joel and company are earning their pay.
It also warrants attention that the fund’s risk is also six percentage points lower than the S&P 500. So, from a risk:reward perspective, Low-Priced has certainly earned this month’s modest upgrade from “OK to Buy” to “Buy.”
A final note: Joel likes companies with sustainable cash flows and low P/Es, with some 900 holdings and its smallish-cap value orientation, Low-Priced finds itself holding some not-too-easily traded (illiquid) securities both here and abroad.
For that reason and its allure to performance-chasing investors, the fund imposes a 1.5% redemption fee on shares held fewer than 90 days.
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