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Fidelity Focused Stock (FTQGX)

Today’s pick is a fund that seeks capital growth and invests in domestic and foreign issues. The fund currently has a four-star rating from Morningstar.

Fidelity Focused Stock (FTQGX)
from The MoneyLetter


Fidelity Focused Stock (FTQGX) typically invests in 30 to 80 stocks (currently 50), and has 43% of assets in the top...

Today’s pick is a fund that seeks capital growth and invests in domestic and foreign issues. The fund currently has a four-star rating from Morningstar.

Fidelity Focused Stock (FTQGX)

from The MoneyLetter

Fidelity Focused Stock (FTQGX) typically invests in 30 to 80 stocks (currently 50), and has 43% of assets in the top ten holdings. This is a decidedly large cap fund, with nearly 90% of assets so invested. Manager Stephen DuFour is free to invest in both value and growth stocks, but really seeks out stocks that offer growth at a reasonable price—companies that will grow earnings materially faster than the market.

DuFour’s investment process is driven by bottom-up fundamental research. He looks for quality—strong balance sheets with high cash and little debt, low stock price volatility, high return on invested capital, and strong free cash flow.

He further emphasizes firms that have maintained strong earnings during difficult economic times. He asserts that an earnings-based approach can help capitalize on volatility. He notes that when large-scale events impact the stock market—such as the fiscal cliff and overseas economic slowdowns, for example—he can track how companies’ earnings and stock prices respond to these events. He can assess whether a firm’s earnings were meaningfully hurt, or if only the stock price was depressed. If the latter, a buying opportunity may present itself.

Late in 2013, the fund held stocks with aggregate earnings growth above that of the S&P 500, via a combination of “owning faster growing securities in the technology, health care, and financial sectors, and not owning slower-growth names in the consumer staples, industrial, and utilities sectors.” Information technology was the top portfolio sector at 23% of assets, followed by health care and financials (about 16% each). In 2012 and 2013, the fund outperformed 66% and 85% of the large growth category, respectively.

(800) 544-8544 • Minimum investment: $2,500, $500 IRA

Walter Frank, Moneyletter, www.moneyletter.com, 800-890-9670, January 2014