Fidelity Favorites

01/23/2014 8:00 am EST

Focus: FUNDS

Jim Lowell

Senior Partner & Chief Investment Strategist, Adviser Investments

Fidelity continues to be creative and innovative, both on the mutual fund side, and with its recent launch of passive sector ETFs, explains Jim Lowell, editor of Fidelity Investor.

Our top conservative idea for 2014, Fidelity Event Driven Opportunities (US:FARNX), is so new that Morningstar doesn't rate it; nevertheless, I gave it a buy rating fresh out of the box on December 12.

Especially in a toppy market, I think this fund looks like a smart money move. Fidelity's game here is not buying markets in bunches, but by selecting top bananas.

I like the emphasis on special situations; the ability to out-analyze, out-think, and out-execute the field, ought to lead to outperformance; though the probability of low correlation can lead to performance dislocations in the shorter term.

Seeing as many companies as Fidelity does, every day of every week, means bright minds and attentive ears ought to be able to glean advantages in a 2014 marketplace that is already so crowded with buyers, it's hard to know where to look for bargains.

Time will tell the tale of this being a good fund or not; but the idea is likely to withstand the test of time and the timing of its launch tells me Fidelity thinks its time is now.

Meanwhile, my top speculative pick for 2014 is one that swims against the current: the Fidelity MSCI Materials Index ETF (FMAT), which holds stock in chemical, construction materials, glass, paper, and forest products, as well as companies involved with metals, minerals, and mining.

The top ten holdings are Monsanto, Dupont, Dow Chemical, Freeport-McMoran Copper & Gold, Praxair, LyondellBasell Industries, Ecolab, PPG Industries, Air Products and Chemicals, and International Paper.

The bet is that the global economy does, in fact, turn out to be faster-paced in 2014. The risk is that the fast pace turns out to be lackluster or worse.

Offsetting the risk: you can trade out of this ETF quickly with no redemption fee issues to worry about. The opportunity: owning supplies of what the world wants more of, but can't get enough of.

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