Last month we purchased Fidelity Limited Term Bond (FJRLX) in our model portfolio. Part of our strat...
Three Winning Funds for a Rebound
10/23/2007 12:00 am EST
Thurman Smith, editor of Equity Fund Outlook, says funds that have done well since the August low are likely to outperform in the market’s next upward move.
The action since the correction low remains the most useful way to target the best candidates for consideration in the remainder of the current leg up. These funds have outperformed the Wilshire 5000 with dividends since the low in August.
At any-cap Spectra N (SPECX), Patrick Kelly has regularly found winning stocks by using Alger’s strategy of looking for companies that are either experiencing rapid growth, such as Google, or undergoing a turnaround, such as Oshkosh Truck Corporation. He then applies a strict sell discipline to the positions by selling a holding when it reaches its price target. As might be expected, trading is heavy.
Indeed, the fund’s portfolio-turnover rate of 232% is higher than that of 90% of the funds in its category. Trading means more commission costs and high turnover can lead to short-term capital-gains payouts. As it happens, Spectra has had a large tax-loss carry forward, so it has not paid any distributions in the three years Patrick Kelly has been in charge. But those losses could be exhausted by next year.
Its expense ratio has been recently capped at 1.50%, which is a big improvement from last year’s 2.01% price tag. But that expense level is still much higher than its typical no-load peer.
Fidelity Growth Discovery (FDSVX) is a standout diversified choice from Fidelity. In charge only since February, and under a new “growthier” charter, Jason Weiner has put more than 40% of assets in technology stocks; some, such as Research in Motion and Google, are quite high priced.
So far, the changes look very well timed. By dramatically reducing the fund’s exposure to financials, Weiner sidestepped much of the market’s real estate-driven pullback. He also made some good calls within technology, including EMC and Nokia. Of course, aggressive earnings momentum style investing can be risky. It might be best to think of it as a supplemental holding to add zest to a portfolio. Its low expense ratio (0.80%) is a plus.
Asian and Latin American funds have been big movers lately, but I still recommend using flexible emerging-markets funds not to get boxed in to one region when its day is done. The best choice for new investors is Excelsior Emerging Markets (UMEMX). As [parent] US Trust was purchased by Bank of America, Excelsior funds are now administered by their Columbia management arm. The tickers and managers are unchanged, but the minimum initial investment for all Excelsior funds has been increased to $2,500.
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