This balanced fund’s top five holdings are: Berkshire Hathaway Inc Class B (BRK.B, 4.06% of assets), Exxon Mobil Corporation (XOM, 3.04%), Wells Fargo & Company Common St (WFC, 2.84%), JP Morgan Chase & Co. (JPM, 2.79%) and Apple Inc. (AAPL, 2.79%).
Fidelity Export & Multinational’s (FEXPX)
from Fidelity Monitor & Insight
Just over a year ago, Fidelity Export & Multinational’s (FEXPX) beleaguered shareholders finally got some good news in the form of a new manager, Gordon Scott. While Gordon had been doing a good job running Select Consumer Discretionary, we didn’t have much more to base a new rating upon. Moreover, as a large-cap growth fund, Fidelity continued to have far better options. So we decided to give Gordon some time to refashion his new charge, and see how he fared. He’s done just that, and fared well.
Today, the fund bears little resemblance to what Gordon inherited. Although its number of portfolio holdings and its concentration in its top-10 stocks are still in the same ballpark (92 and 28%, respectively), sector weights are wholly different. While tech remains about 20% of assets, financials were increased about five percentage points to another 20% weight, and health care was heightened by as much to today’s 15%. Industrials were almost doubled to 13%.
With assets in decline, purchases were made by rotating completely out of telecom services and utilities, and Gordon made a very timely and wise reduction in energy, which at 7%, is in line with the S&P 500.
The intrepid new manager slashed the fund’s foreign exposure in half to about 5%. Needless-to-say, turnover Gordon Scott spiked. But something more subtle had occurred: owing to the fund’s larger stakes in financials, health care (not biotech) and industrials, Export & Multi was no longer large-cap growth, but rather a large-cap blend fund whose S&P 500 benchmark now made far more sense.
By the time the dust settled in 2014, Export still finished the year trailing its benchmark by four percentage points (9.6% vs. 13.7%). But in the final quarter of that year, Gordon had finally managed to catch up with the market: the fund returned 5.1% versus 4.9%.
While it may seem a bit academic for us to reclassify Export to Large Cap Blend from Large Cap Growth, it’s significant because of the new perspective that exercise provides. Relative to its former “growthier” and far more volatile peers, Export was and would still be a laggard. But when matched against its true peers, it’s now Fidelity’s top-performing large cap blend offering.
And, with a relative volatility of 0.98 versus 1.05 for his peers, its risk-adjusted performance is all-the-more-attractive.
For the reasons above (plus our disappointment with the performances of Export’s new peer group), we’ve upgraded Export to Buy from Hold. Some caveats: We’ve long complained about the fund’s redemption fee (0.75% on shares held 30 or fewer days), which is a vestige to its launch two decades ago when it was imagined to be trading in smaller, less liquid stocks. Also, the fund’s name is, at best, a stretch, and should be changed. With those caveats, we’re expecting more good things to come.
Jack Bowers, John M. Boyd and John Bonnanzio, Fidelity Monitor & Insight, www.fidelitymonitor.com, 800-397-3094, September 2015