Price's Ultimate Funds

03/25/2005 12:00 am EST

Focus:

Price Headley

Founder and Chief Analyst, BigTrends.com

Price Headley may be best known for his technical trading services, but his NetLetter.com also features a long-term, fundamentally-based "Ultimate Fund Portfolio." Here, he discusses two of the fund's positions-an international small-cap fund and an energy play.

"Fidelity International Small Cap (FISMX) is the most aggressive of our fund positions within our 'ultimate fund portfolio.' It's also the one least likely to get bogged down by fears of a slowing US economy, and in many ways, is acting as a hedge. Indeed, the fund has gained 9.7% since we first bought it back in mid-January. What's behind all this strong foreign performance? The keys are domestic inflation and a weak dollar. Neither are conditions that will last forever, but for now, overseas opportunities just look better. Part of that is attributable to the overall growth we're seeing overseas that isn't quite apparent within the US.

"Another important part of that growth, though, is just smart management. The biggest piece of this fund is invested in Japan (27.4%) and we expect Japan to reap big rewards as the US economy continues to stabilize relative to the Pacific Rim. The next biggest region for this fund is the UK (16.3%). European stocks have been basically flat this year, but like Japanese stocks, they are actually offering more potential than most investors may realize. And finally, Australia is a major component (8.3%), and Australian stocks are a favorite of ours right now. Overall, we plan on holding the international fund well into this year."

"We have also just issued a new buy recommendation for Fidelity Select Energy (FSENX ). It looks like the energy stocks are gearing up for a second wind. Oil hit an all-time high recently, and it doesn't look like it's going to go lower (in a meaningful way) anytime soon. Yes, OPEC promised to ramp up their output, but there are two issues with that promise. First, they've made this promise eight times in the last year, and failed to deliver all eight times. And second, even if more crude is pumped, the spring/summer increase in auto fuel demand is going to at least offset the increase in crude oil production. Based on the Department of Energy's forecast of gas prices approaching an average in the mid-$2 range, we'd like to take a position on the other side of the gas pump and own some of the oil stocks."

Related Articles on