Top Picks 2017: Fidelity Int'l Small Cap Opportunities

01/20/2017 6:00 am EST

Focus: FUNDS

Jim Lowell

Partner & Chief Investment Officer, Adviser Investments

In 2017, I want to stay with small cap companies but also go global, asserts fund expert Jim Lowell, editor of Fidelity Investor.

Recently, crossing the waters has been a recipe for higher volatility and lower returns.

But a sea change is affecting U.S. small caps for the better — a growing economy, a strengthening consumer, and trading with their neighbors rather than getting caught up in cross border currency wars.

These factors are also beginning to manifest themselves overseas — thanks to massive stimulus efforts underway in Europe and Japan.

My recommendation to play this trend is Fidelity International Small Cap Opportunities (FSCOX). Here, veteran multi-cap international stock picker Jed Weiss invests in small-cap companies from around the globe.

In this case, small-cap is defined as having a market-cap of $5 billion or less — so it's what the Street calls a "smid-cap" (small and mid cap) basket.

U.S. investments are present, but come in fourth out of the top five countries: Japan (30.3%), U.K. (19.6%), Germany (6.5%), U.S. (5.3%), and Sweden (5.0%).

Emerging investments make up just 6.8% of the holdings. The top sectors are industrials (21.2%), consumer discretionary (19.6%), and health care (12.9%).

Weiss has returned 170.8% versus 125.7% for his benchmark since he began managing the fund in December 2008. That's an outsized return for this expert small cap investor. Expect more of the same in 2017.

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