Video Reports

Embed this video

Copy Code

Link to this video

Get LinkEmbedLicenseRecommend (-)Print
Bookmark and Share

By Russel Kinnel and Christine Benz | 06-02-2014 10:00 AM

4 Under-the-Radar Fidelity Funds

These portfolios have the ingredients to stand alongside the fund shop's most popular names.

Christine Benz: Hi I'm Christine Benz for Morningstar.com. Fidelity is an enormous player in the 401(k) space. Joining me to share some Fidelity stock-fund ideas is Russ Kinnel. He is director of manager research for Morningstar.

Russ, thank you so much for being here.

Russ Kinnel: Good to be here.

Benz: Russ, I think a lot of people look at their Fidelity 401(k) plans and they might see some very low-cost index funds, also stalwarts like Fidelity Low-Priced Stock or Fidelity Contrafund. Why would one even need to look beyond those types of holdings?

Kinnel: That's a good question. Certainly those [funds that you mentioned] are probably the ones you would start with, but I think it's worth knowing some of the funds that are not quite as well-known. One, they might not all be available in your 401(k); maybe some of these are. Two, these are smaller funds where the manager should be there for a while and really has a potential to actually outperform. There are a few things going there, but I think these funds stand out on their own.

Benz: Let's start with the first one, and that's Fidelity Large Cap Stock. It has the highest ratings of these four funds on your list. Let's talk about what you think is the thesis behind that particular fund. Why should people give it a look?

Kinnel: That's right. We rate it Silver. [Fund manager] Matt Fruhan has a really strong record going back to 2005, and we think it is a nice mix of value and growth. He is a little more opportunistic, and by that I mean he'll buy either value or growth stocks when they're a little beaten up. He's done an outstanding job of doing that. He's beaten the index, so obviously, if you think he can maintain that, that's one reason to own it instead of an index fund.

Benz: One knock against some of Fidelity's larger funds--Magellan, several years ago, for example--was that they were very indexed like. Should people be concerned about that as they look across some of these funds?

Kinnel: For sure. These mostly are very diffuse portfolios; you usually get that at Fidelity. So there are hundreds of names, 200, 300 names, in the portfolios. So, it's not going to be a really focused fund that does something really different, but managers can still add value. We've seen over the years many funds have been able to beat the index even with a large portfolio, even with a fairly high R-squared. So, I don't think that's the end of the world.

I think it's more about, is this a manager who can really pick stocks well? Fidelity has done a decent job over the last few years of building up their analyst and their portfolio manager staff, and now I think there are a few good funds that are kind of flying below the radar.

Benz: Another fund on your list that you think investors should look at is Fidelity Blue Chip Growth. This is a large fund. I think it's a good bet that it does appear on a lot of 401(k) menus. We recently moved it from a Neutral Morningstar Analyst Rating up to Bronze. What gave us the confidence to do that?

Kinnel:  Manager Sonu Kalra started at this fund in '09, and before that he had a very good record at Fidelity OTC. So, you put them together, it's about 10 years of a good record. That's really what attracted us to it.

The fund is a standard kind of growth-at-a-reasonable-price fund, just like you'd expect from the name. It's large caps; they're growth stocks. A lot of the usual suspects, but again, he's done well with a pretty large portfolio.

Read Full Transcript
{1}
{1}
{2}
{0}-{1} of {2} Comments
{0}-{1} of {2} Comment
{1}
{5}
  • This post has been reported.
  • Comment removed for violation of Terms of Use ({0})
    Please create a username to comment on this article
    Username: