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How Have My Fidelity Calls Fared?

My track record picking funds and forecasting markets.

Dan Lefkovitz, 10/30/2007

A version of this article appeared in the September 2007 issue of Morningstar Fidelity Fund Family Report, our monthly newsletter dedicated to helping Fidelity investors find superior long-term investment opportunities.

I don't shy away from making calls in the Fidelity newsletter. I know that subscribers want Morningstar's view on Fidelity funds and markets in general, and I see my role as giving advice and predictions rooted in my contrarian investing philosophy.

On occasion, a subscriber will e-mail me and ask about my track record. It's a perfectly fair question. If you're taking advice from someone, you deserve to know if that person has any forecasting skill. My calls are generally long-term oriented, but I'll still tell you what's worked so far, what hasn't, and where I'm going from here.

Go Growth!
For the past few years, Morningstar has been calling for a rebound in large growth, the worst-performing corner of the market since 2000. We maintained our conviction even as smaller caps and value kept winning, urging investors to rebalance if their large-growth allocation had slipped. In April 2007, after a weak first quarter for large-growth, I laid out the case again. The piece also appeared here.

My timing was lucky. Large growth made up a lot of ground during the second quarter and hasn't looked back. Meanwhile, value funds, with their heavy allocations to financial-services stocks, have born the brunt of subprime worries and the credit crunch. Erstwhile superstar small value is the worst-performing style-box-based category in 2007.

The Best Fidelity Fund You've Never Heard of...and Other Picks
It's early in the game, but I'm especially pleased right now with my top pick for playing a large-growth rebound at Fidelity. Fidelity Growth Discovery FDSVX is having a sensational year. When I first touted the fund, it had just $500 million in assets--piddling by Fidelity standards. But since it got a new name, a new benchmark, and a new manager, the fund has beaten the pants off of the broader market and the large-growth category. Jason Weiner has steered it to a 30% gain for the year to date through Oct. 17, 2007, ahead of 95% of its large-growth peers.

Another fund that I've recommended in the growth space is Capital Appreciation FDCAX. That fund has chalked up a 17.6% gain for the year. Though it may not be spectacular, that solid return is still far ahead of the fund's S&P 500 benchmark and in the large-growth category's top half. I like manager Fergus Shiel a lot and would stick with this pick.PAGEBREAK

I also consider Magellan FMAGX a successful call. Morningstar got more bullish on that closed fund from the moment new manager Harry Lange took over, urging long-suffering investors to give him a chance. He has vindicated our stance in 2007.

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