Top Picks 2017: Fidelity Small Cap Growth

01/26/2017 6:00 am EST

Focus: FUNDS

Jim Lowell

Partner & Chief Investment Officer, Adviser Investments

With all the concerns about trade wars, tariffs, and a U.S. dollar that is as strong as it has been in nearly 15 years, 2017 is the perfect time to think small and buy local, suggests Jim Lowell, a specialist in the Fidelity family of funds and editor of Fidelity Investor.

Indeed, the strong dollar makes U.S. large cap exports more expensive and hence less competitive overseas.

In 2016, especially in the post-election rally, small cap companies surged — in part on a wave of optimism about the incoming president being more pro-business and more anti-regulation.

That initial wave of optimism ought to crest in early 2017 as polemical policy hopes meet pedantic political reality.

But the groundswell of a confident and able U.S. consumer wed to our growing U.S. economy creates the kind of environment that benefits small cap stocks — such as those in our recommended fund Fidelity Small Cap Growth (FCPGX).

Small caps have the ability to cater to their neighborhood — without the issues that may dog large-cap multinationals like a strong dollar making products and services less cost competitive abroad.

At Fidelity Small Cap, manager Patrick Venanzi invests in companies that have similar market caps to those found in the Russell 2000 Index or S&P 600 Index, that his research tells him should have an above average potential for growth.

Since his inception at the fund (November, 2011), he has returned 101.0% versus 89.9% for his benchmark â€" a reflection of his stock picking, not market mimicking, skill.

Foreign investments make up 7.7% of the holdings. The top sectors are information technology (23.5%), health care (21.0%), and industrials (19.7%).

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