Ned Johnson's offbeat portfolio is missing many of his firm's biggest funds.
Christopher Davis is editor of Morningstar's Fidelity Fund Family Report, a monthly newsletter that offers independent guidance on the fund family and helps investors find the best Fidelity funds.
Behind modern-day Fidelity is its longtime chief, Ned Johnson. Under Johnson, who is often referred to simply as "The Chairman" within his firm's walls, Fidelity's fund lineup has grown from just a couple of dozen funds to nearly 300, many of them useful, many others not. But interestingly, the mastermind behind Fidelity's sprawling fund lineup leaves vast segments of it untouched by his own investments.
Yes, it's unrealistic to expect anyone, including Johnson, to own every Fidelity fund. And given the preponderance of underwhelming offerings and untested managers in Fidelity's expansive lineup, I wouldn't begrudge those who invest selectively. However, I think it's reasonable for investors to wonder why they should choose funds that Johnson himself avoids.
Johnson is chairman of Fidelity's two fund boards, and, like all trustees, the SEC requires him to report how much he has invested in each of the funds he oversees. Johnson's total stake in the funds is not clear--the government only requires trustees to disclose their investments in dollar ranges, with the highest being "more than $100,000." But as of December 2008, he had at least $1.3 million (and quite possibly more) invested across just 14 Fidelity funds, according to SEC documents.
Stock investors pay close attention to whether top executives invest heavily in the companies they manage. They usually regard a big ownership stake as a good sign because managements know (or at least should know) better than anyone how well their business is performing. Similarly, Johnson should have more insight into his firm's inner-workings than outside observers do. So, where he puts his own cash could say something about where he thinks Fidelity's abilities are strongest. Now, I wouldn't regard Johnson's holdings as a buy and sell list. His portfolio may say just as much about his own investing philosophy as it does about Fidelity's strengths.
Don't Try This at Home
In fact, you'd be wise not to follow Johnson's lead too closely. Most financial advisors would tell him his portfolio isn't diversified enough. Of course, the SEC documents provide an incomplete portrait of his portfolio and perhaps it would appear more balanced if we knew more about his investments outside of mutual funds. But from what we can see, it's fair to say he's a relatively aggressive investor with a penchant for racier, niche areas of the market.
Indeed, Johnson's lone core holdings are Fidelity Contrafund
Surprisingly, the 78-year old Fidelity chairman keeps next to nothing in his firm's mostly top-rate bond-fund lineup. Johnson's sole investment is his relatively modest $50,000 to $100,000 position in Fidelity MA Municipal Money Market, a play-it-safe cash holding that hardly showcases his firm's fixed-income prowess, especially in the municipal-bond arena (muni-bond head Christine Thompson and her team won Morningstar Managers of the Year honors in 2003). He certainly could scratch his risk-seeking itch by investing in aggressive high-yield offerings like Fidelity Capital & Income