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Fellow Mutual Fund Investor,
It’s common knowledge that Fidelity is where you put your money when you want to beat the market, not try to mimic it with index funds.
But hardly anyone knows about the small group of Fidelity funds that, when combined properly, drastically reduces investor risk – while handing investors profits that are a whopping 201% greater than what ordinary Fidelity investors get.
Fidelity won’t tell you which of their funds they think will be the index-beating ones… they won’t highlight the most powerful funds for you… they can’t tell you how to combine the funds properly anyway. As a result, most Fidelity investors miss out without even knowing it.
About Jim Lowell
Jim Lowell is the editor of Fidelity Investor, the private and independent advisory published for individual investors seeking superior performance from their Fidelity investments.
Jim’s subscribers are known as “Fidelity’s Fortunate Few.” The fund selections they get directly from Jim double, and in many cases triple their returns. His strategies for investment income have boosted members’ annual income two-fold. Jim’s a bona-fide Fidelity genius.
He’s also a real-life Fidelity fanatic. He was born in Boston and he still lives there. He holds Master’s degrees from both Harvard University and Trinity College. He used to work at Fidelity, where he helped launch Fidelity’s most prominent publications, Fidelity Focus and Investment Vision, which turned into Worth magazine.
You can’t read an article about Fidelity in any major publication — The Wall Street Journal, The New York Times, Barron’s, Forbes, Fortune, you name it — without seeing at least one quote from Jim Lowell. Now you can get Jim’s best advice directly from him, as a subscriber to Fidelity Investor.
It’s a crying shame, if you ask me. Fidelity is where you buy the manager. This has always been the most profitable mutual fund investing strategy. It’s the Cardinal Rule of savvy mutual fund investing for crying out aloud. Buy the manager!
But do you know who those managers are? And wouldn’t it be nice to know which managers are the worst, so you can avoid disappointment?
It’s amazing, actually. Fidelity gives you reams of valuable information and does an amazing job educating their clients about how to invest. But remember the last time you selected a fund? Did Fidelity ever pull you aside and tell you “Wait, don’t buy that fund. Buy this one instead?” They won’t tell you (and in some instances, they can’t) tell you anything at all about…
- which specific funds belong in your portfolio,
- when you should buy them,
- why you should switch funds,
- how you can find sure-fire winners fast,
- how you can spot hidden red flags flying atop the Fidelity funds that don’t belong in anyone’s portfolio!
This is where I come in.
I’m Jim Lowell. I head up the world’s largest independent research group dedicated to Fidelity, its funds, and its investors.
Think of me as your Fidelity inside man… your serious-money watchdog. I used to work at Fidelity, but not anymore. I’m entirely independent now and totally free to tell you about all of Fidelity’s strengths and weaknesses.
I know more than a thing or two about helping Fidelity investors navigate all of the twists and turns in order to safeguard their assets and deliver real gains. Acting on the information I provide you, which Fidelity won’t give you, can lead to more profits.
How can I be so sure? Because I follow the Cardinal Rule of Mutual Funding Investing: Buy the manager!
This has always been the most profitable mutual fund investing strategy. It is the only way you or anyone can be sure to blow away the averages.
My 7 secret Funds are a sure-fire way to cut risks, while making twice the profits of ordinary mutual fund investors. These 7 amazingly powerful index-beating funds work gangbusters for just about every Fidelity investor.
So, let’s jump in and start naming names….
Fund #1: Mega Cap Stock (FGRTX)
Mega Cap Stock (FGRTX) can complement any portfolio that owns an S&P 500 index fund or actively managed large-cap fund. Now, there are a lot of funds out there that sound like they’re buying the big boys, but let me tell you that very few actually do. (Instead, most mimic the S&P 500 and hence don’t provide added diversification and do charge you an arm and a leg for trailing the lower cost index fund.)
Lead manager Matthew Fruhan and co-manager Ashley Fernandes invest more than 80% of the fund in companies with mega-cap capitalizations of the battleship balance sheet variety, such as those found in the Russell Top 200 Index or the S&P 100. Don’t think S&P 500—think the largest 50 to 100 companies in the S&P 500. These blue chips, which produce more cash than they can count (let alone spend) and as such offer Texas-sized dividends, are running leaner and more profitable since the crash of ’08—and with more cash in their coffers than many governments.
Fruhan can reach across the pond, but prefers U.S. battleships (he has a little over 5% invested outside of the U.S.). Such battleships can weather downturns better than smaller-cap ships and, when the wind is at their back, gain reasonable returns with a lot less risk. But, they also tend to be multinationals and hence prone to currency issues and potential trade and tariff wars. I recommend owning this fund as an anchor to windward in stormy seas, and as an even keel for markets like these when we have more aggressive growth sails set.
Manager Matt Fruhan is a growth-at-a-reasonable-price (GARP) guy who pays a lot of attention to what drives each company he owns and a lot less attention to the headline vicissitudes. He’s a big believer in free cash flow—a sign of a company’s management skill and competence in dealing with growth-related strains and down cycle duress. There is no manager I trust more to navigate the largest-cap global seas than Fruhan, and I wouldn’t set sail without him.
In late October 2017, Ashley Fernandes joined Fruhan as a co-manager of the fund, a move that reflects Fidelity’s overall approach to long-term succession planning as well as their recognition that Matt and his shareholders may be better served with Ashley contributing to the analysis of existing positions and the pursuit of new ideas. While I’ll be keeping my eye on the fund now that there are two managers at the helm, Ashley should be able to learn a lot from an excellent manager like Matt.
Fund #2: Contrafund (FCNTX)
Will Danoff has been managing Contrafund (FCNTX) for over 27 years. His contrarian style and stellar track record speak to the strengths of a stock picker who knows how to reward shareholders year-in and year-out. Danoff had an exceptional year in 2017 partly due to his tech-heavy tilt, returning 32.3% for the year through December 31 versus 21.8% for the S&P 500. For stellar performance recovery in the short term and unbeatable long-term returns, I named Will Fidelity Investor’s 2017 Manager of the Year.
Here, Will makes investments across the board in companies believed to be undervalued by the public, overlooked by institutions, and/or underweighted by both. The portfolio is primarily domestic, but 7% of the portfolio is currently given over to foreign stocks.
Contrafund, which began trading in May 1967, was the brainchild of former manager Leo Dworsky, who mentored Will in the art and science of contrarian investing. Dworsky mentored Will in this investment style, which is perhaps best summed up through a 1982 New York Times profile: “As Fidelity’s resident exponent of a gutsy market philosophy known as contrary opinion investing, Mr. Dworsky is constantly looking for what he calls ‘crescendos of euphoria and pessimism.’’’ His basic tenet is that at turning points, the crowd is almost always wrong. At such points, he considers the alternative to market hysteria, applies fundamental analysis to decide which stocks are undervalued, and acts accordingly. So far, it has worked quite well.
Running the world’s largest actively managed fund is one thing. Managing to beat benchmark and peer group over every meaningful timeline is another. Add lower risk and greater bear market defensiveness to the mix, and if you’re not asking for the impossible, you’re asking for the improbable. Unless, that is, you know Will Danoff and Contrafund.
Longstanding members know my abiding confidence in this classic go anywhere manager. His performance numbers attest enough as to why I have such a high conviction in him and his stock-picking skills. But he’s also a straight shooter; not shy about telling you when things are not only currently tough but could stay tough for some time to come.
For Leo, a half empty glass was full of opportunity. Ditto for Danoff. And since taking over this fund back in September 1990 (Dworsky managed from 1967–1983), the student has lived up to his master: Will has returned 2,879.3% vs. 1,349.9% for his benchmark … astoundingly good.
One aspect to Will’s success that I like to point out is that his outperformance has always been bolstered by a better defense. In investing, one old saw is that buying at a discounted price mitigates a percentage of risk. The benefit of buying low is ingrained into the contrarian approach to the marketplace … but many imitators of this fund’s approach have paled in terms of performance because they were impaled on value traps (stocks that sold off for a reason and went lower). Stock selection born of scrupulous research is requisite for success.
Will Danoff makes investments depending on where he sees undiscovered value. Among his top holdings are Facebook, Berkshire Hathaway, Apple, and Starbucks. While these holdings are not exactly off the herd’s beaten trail, they are almost always bought when they detoured from the herd’s expectations and temporarily paid the price for doing so.
The fund has a market value of over $120 billion, leading repetitive journalists to snipe about how it’s too big for its own britches. My favorable view is based on Danoff’s actual performance over meaningful time periods. My most recent manager rankings shows you what I mean. Danoff crushes one of the measures I use to determine a manager’s skill: risk-adjusted relative career return. This is a manager’s return after factoring out both the fund’s benchmark and the level of risk the manager has taken on relative to that index, and any positive number (above 0) would mean very successful active management. And that’s what you’ll find with Danoff. What’s more, Danoff’s 3-, 5- and 10-year numbers, as well as those of his overall tenure, make this a solid choice for time in the markets, not market timing.
He has crushed his S&P 500 benchmark since he began managing the fund in September 1990. Part of that outperformance is the fact that he returned 32.3% in 2017 versus 20.5% for the S&P 500.
Fund #3: Event-Driven Opportunities (FARNX)
One of the biggest risks in today’s market is the velocity of unthinking money flooding into passive market-basket indexes and ETFs with complete disregard for valuation and price. When that tide turns, investors who are currently mistaking low cost for low risk will pay the heftiest price in terms of losses. By contrast, managers like Arvind Navaratnam who have been pursuing companies beyond the major market index heavyweights, will come to the performance fore.
Arvind Navaratnam created Event Driven Opportunities (FARNX) to both buck trends and ride them. I view his investment style as a more quantitative, rules-based approach to what is typically a more loosely defined version of being contrarian. His low-correlated fund is a good fit within the fold of a well-diversified portfolio.
Navaratnam makes strategic investment moves involving stocks of companies that are experiencing a special situation, such as a corporate reorganization, beneficial ownership change, deletion from an index, material changes in management structure or corporate strategy, changes in capital structure, and anything else that he believes will benefit the fund. So, he has to act fast. His nimbler, quicker and more anomalous strategic approach can be seen in his holdings as well as his turnover rate of 117% (compared to Will Danoff at Contrafund, who has a turnover rate of just 29%).
By paying attention to these situations, he seeks to take advantage of price swings and temporary dips. It’s tough to choose a benchmark for such a unique fund—Fidelity uses the Russell 3000 Index. Navaratnam has returned 46.1% versus 38.9% for that benchmark since he began managing the fund at its December 2013 inception. The Event Driven Opportunities fund is unique in terms of its approach, holdings and low correlation to the S&P 500; as such, it could play a role in most portfolios.
Over four years ago, when Event Driven Opportunities was launched as a new fund with Arvind Navaratnam as its lead manager, I said buy it … and I still do. I believe that Arvind’s fund should be a household name. A decade from now, I’d wager that Arvind himself will be—so long as he sticks to this fund.
Fund #4: Going Global
The foreign marketplace is neither for the uninformed nor the faint of heart. No investor has much business buying an index fund that merely imports all the risks of such a marketplace without being run by one of the top international stock pickers on the planet.
In 2017, I recommended this fund as a way to stay with small-cap companies but go global as well—and this fund did not disappoint. The fund gained 35.7% in 2017, making it one of the top performers in Fidelity’s international lineup. Before last year, crossing the waters had been a recipe for higher volatility and lower returns, but the sea change affecting U.S. small caps for the better in 2016 (growing economy, strengthening consumer, trading with their neighbors rather than getting caught up in cross border currency wars) manifested itself overseas in 2017.
Here, veteran multi-cap international stock picker 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 typically rank number three or four out of the top five countries represented in the fund. The top sectors are industrials, consumer discretionary and information technology. Weiss has returned 226.02% versus 190.30% for his benchmark since he began managing the fund in December 2008 through mid-year 2017. That’s an outsized return for this expert small-cap investor. Expect more of the same in 2018 and beyond.
Fund #5: Total Emerging Markets (FTEMX)
John Carlson may not be a household name, but I just recognize him as Most Promising Manager for 2018.
John Carlson has been in the emerging market bond buying business for longer than some emerging market countries have been in existence. Emerging market debt and equity may sound more frightening than running with the bulls in Pamplona, but in 20-plus years of managing his other charge, Carlson has yet to disappoint over any real investment timeline in terms of either better offense or better defense, and we can expect the same of him here.
Throughout John Carlson’s impressively successful and extensive investment career, he has focused on, and mastered, emerging markets stock and bond investing. Carlson has an excellent track record at New Markets Income (FNMIX), which is why he was the perfect choice for portfolio manager when Fidelity launched Total Emerging Markets (FTEMX), an emerging markets balanced fund, in 2011.
Total Emerging Markets is not your typical growth and income fund. John Carlson runs Fidelity’s emerging markets balanced fund with a team of six additional managers. He invests in emerging markets stocks and bonds, with about two-thirds of the portfolio in stocks and a quarter in bonds (with the rest in cash). He has returned 45.98% versus 31.78% for the MSCI Emerging Markets Index since he began managing at the fund’s inception. Foreign investments make up around 98% of the fund’s holdings, and the top sectors are information technology, financials, and consumer discretionary.
My recommendation: The economic data supports a more healthful probability for sustained global growth, and it has done so since I traded into this fund in our Models back in mid-2017. Even if the pace of growth may not be as strong inside the next 18 months or so as it was in the previous months, I have the utmost confidence in this fund’s lead manager, as well as in his wisdom: “If you don’t want to own the debt, you won’t want to own the stock”. There may be some trying times that test more than patience, but as a way to diversify a growth and income portfolio, it stands out.
You might want to think of it like this: If you started off with 100% of your money in Balanced (FBALX) and then placed 15% to 20% of that amount in this fund (keeping 80% in Balanced), that move could make long-term investment sense for both the growth and income sides of your portfolio.
Another move that makes long-term investment sense: Reading my exclusive members-only interview with John Carlson in the December 2017 issue. Sign-up today to gain access to this interview.
Fund #6: Select Healthcare (FSPHX)
The healthcare industry benefits from a number of generational themes that make this sector the investment opportunity of our lifetimes. First, aging demographics of established economies and marketplaces create a growing, necessary pool of willing and able consumers for the goods and services this sector encompasses (pharmaceuticals, biotechnology, medical equipment, HMOs, management and patient record software and storage, and more). Moreover, there is growth found in emerging market consumers demanding more and better healthcare.
While demographics and rising living standards are slated to be two pillars of growth for the sector, there’s also an accelerating pace of innovation, not to mention mergers and acquisitions. Biotech research companies are discovering new drug therapies that can cure diseases that were previously untreatable, creating drug therapy markets that previously didn’t exist. Aging demographics, growth in emerging markets, and innovation should provide growth opportunities for the healthcare sector for decades to come.
What’s more, Select Healthcare (FSPHX) is also not your average healthcare fund—not in terms of its manager, performance, or holdings. Manager Eddie Yoon invests in companies involved in the design, production, or sale of health care products and services, including, but not limited to: pharmaceutical, diagnostic, administrative, medical supply, and biotechnology companies. Eddie invests with an eye on the necessary demographic trends and stories of aging boomers needing a youth-inducing crutch as well as on the emerging market theme of new consumers demanding better healthcare.
Eddie Yoon’s knowledge of the health care industry is stellar, and he has the record to prove it. He’s returned 390.4% versus 271.9% for the MSCI USA IMI Health Care Index since he began managing the fund in October 2008. (He has also managed the more narrowly focused Medical Equipment & Systems (FSMEX) since 2007.) This broad healthcare fund is an excellent choice for those who want exposure to the different subsectors of the healthcare industry.
Fund #7: Teamwork
This actively managed exchange-traded fund is run by a team of bond managers led by a veteran bond manager who since he began managing this fund in December 2004, has returned 80.7% through September 30, 2017 versus 75.3% for the Bloomberg Barclays U.S. Universal Index and 69.6% for the Bloomberg Barclays U.S. Aggregate Bond Index. The ability to beat two benchmarks is one reason why this excellent bond manager claims a spot in two of my income-producing model portfolios, Growth & Income and Income.
Here, the lead managers along with four other managers, invest in many different types of bonds using the Bloomberg Barclays U.S. Aggregate Bond Index as a guide. The lead managers have been managing the fund since its October 2014 inception, and they have returned 9.6% versus 7.8% for their benchmark. Since then, Michael Plage, Michael Weaver, and Celso Munoz also jumped on board to co-manage the ETF. Yield: 2.6%.
A staple and a stable diversified bond exchange-traded fund if ever there was one—with the added advantage of being well managed. The five managers invest in bonds of all different types, with the current mix being 45.8% government, 27.9% corporate, 18.3% mortgage, and 0.9% municipal.
When you join Fidelity Investor today, the group you’ll be joining might surprise you. Not all of them are investing aggressively for growth. Not all of them are rich, either. Some are just starting out and come to us with only modest amounts to invest. Some are quite well-off and you might wonder why they’re so eager to make even more money.
And there are others who are more conservative in their pursuit of profit. Some don’t even think about growth. They’re only investing for income. And yet, all these various types of Fidelity investors subscribe to the same advisory service… the one that has every Fidelity investor covered… Fidelity Investor.
Every monthly issue of Fidelity Investor is packed with information you just can’t get from Fidelity, including these 5 expertly diversified Model Portfolios:
- Global Quant
- Aggressive Growth
- Growth & Income
Members of Fidelity Investor also get two more model portfolios: Annuity Growth and Annuity Growth & Income.
But that’s not all!
When you try a risk-free subscription to Fidelity Investor, you will also receive a special low-cost Membership rate and 2 valuable Free Reports:
- Top Fidelity Sector Funds & ETFs
- Fidelity Fund Manager Rankings
And if at any time you want to discontinue your subscription, you’re still way ahead because you’ll never be asked to return anything we send you — including your 3 free reports that are automatically yours as a Member.
Fair enough? Well it gets better…
Take 30 days to decide if you like Fidelity Investor and all the tangible extras that come with it, including:
- Monthly issues of the award-winning newsletter Fidelity Investor delivered to both your mailbox and available on the website. Each issue contains my expert advice on the Fidelity family of funds and ETFs and the latest information on today’s market.
- Weekly emailed hotlines where you can keep in touch with my latest research and market analysis so you never have to go it alone.
- Special alert emails including timely new opportunities as well as an update on current market conditions, especially during times of volatility.
- Performance updates on all 5 of the Fidelity model portfolios and my review of nearly 100 401(k) plans.
- 24-hour access to the member-only website from your tablet or smartphone, where you’ll find past online issues of the newsletter and hotlines as well as the model portfolios. Exclusive fund manager interviews in the monthly issues.
If after 30 days you’re not 100% satisfied for any reason, simply call my customer service team, and I will refund every single penny you’ve paid. All tangible extras are yours to keep with my compliments just for giving us a try.
You don’t want to find any of these funds in your portfolio. But if you do, no worries.
You’ll be armed with so many new ways to boost your Fidelity profits it won’t matter how many Fidelity flops are in your portfolio… as long as you immediately switch your losers to Fidelity’s best funds (also given away for free in this special bonus report!), the ones you’ll learn about when you respond in time.
All that’s needed is your permission. We’re all set here. We’re ready to give you all your gifts… ready to impress you with our just-released issue of Fidelity Investor… ready to show you the money and the life enjoyed by “Fidelity’s Fortunate Few.”
Here’s What Happens Next
The moment you respond, you’ll feel a rush of excitement and expectation. That wonderful, exhilarating feeling will stay with you and reignite with each new issue and every new special report you get.
You’ll see how easy it is to break away from being average. You’ll see a brighter financial future than you thought possible. You’ll be amazed to discover you can easily exceed your own expectations by doing nothing more than what you’re already doing… investing in Fidelity funds.
The experience also gives you the rock-steady confidence in your financial future, more assurance of reaching your goals, and the overwhelming joy of relief from worrying about money for the rest of your life… those are all priceless!
Membership, however, has a price, and the good news is…
My publisher has agreed… I now have the green light to bring you in as a member for just $99 for a full year (the standard rate is $229), as long as you let me know within 36 hours. After that? You’ll miss out on this incredible savings opportunity and be asked to pay more.
By the way, at this ultra-low rate of just $99, your membership will more than pay for itself within a month or so, depending on how much you have invested with Fidelity.
However much it is, count on that number zooming north once you experience Fidelity Investor.
I guarantee it!
Editor, Fidelity Investor