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Lowell: Small Cap Yearling

01/09/2004 12:00 am EST


Jim Lowell

Senior Partner & Chief Investment Strategist, Adviser Investments

Jim Lowell is the unquestioned authority on Fidelity funds. The author of five books, he also publishes both The Fidelity Investor and the more aggressive Fidelity Sector Investor. For his top pick for 2004, he looks towards a fund that focuses on small-cap and global investing.

"Fidelity International Small Cap (FISMX) is a yearling fund (launched 9/18/02), co-managed by L.C. Kvaal in London covering Europe, and Tokuya Sano in Tokyo covering Asia. The fund has had stellar performance since its inception- but it's the fund's prospects for future returns that makes it a Best Buy for 2004 in my book. Moreover, despite the limited (15-month) public record of the fund's co-managers, they nevertheless do have extensive analyst experience, and this analyst team's strength has proven especially helpful in outperforming their benchmarks in the dramatically more inefficiently priced small-cap international markets where their muddy boots tread.

"In inefficient markets, better information, better analysis, better execution, typically translates into better relative and absolute gains-if gains are to be had. For reasons that mirror why our own small-cap markets have been and are likely to remain strong- companies with proven management, home-based consumer-focused products are in general among the firms likeliest to buck the economic, political, and multinational problems that Europe's, Japan's, and even the US' large-cap siblings have to contend with. Its largest country weightings as of the latest reporting period are Japan (29.5%), the UK (15.0%), the US (13.2%) but this merely represents the fund's cash position). Its top sectors: consumer discretionary (20.1%), technology (16.7%), and industrials (14.3%). The fund's diversification and unique small-cap niche, could likely add value to any investors portfolio in 2004 and beyond."

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