The top five holdings of this NASDAQ-oriented fund are Apple Inc. (AAPL, 9.88 of assets); Amazon.com, Inc. (AMZN, 4.99%); Groupon, Inc. (GRPN, 4.54%); Google Inc. (GOOG, 4.24%) and Google Inc. (GOOGL, 4.14%). Fidelity OTC Portfolio (FOCPX) from Moneyletter The current manager of Fidelity OTC Portfolio (FOCPX), Gavin Baker, had the fortune to take command of this portfolio in 2009, near the bottom of the bear market. With the exception of 2012, the fund has been well within the top half of the large cap growth category in performance, and was in the top 2% and 3%, respectively, in 2013 (up 46.5%) and 2014 (16.5%). Over his tenure, the fund also outperformed the NASDAQ Composite Index. For the trailing five years (through December 31), the fund chalked up a 17.84% average annual return compared to 17.19% for the NASDAQ. To be sure, the “rising tide” lifted this boat, but the fund’s outperformance owes to Gavin’s stock picking as well. Fidelity OTC was recently added to Moneyletter’s Moderate and Venturesome portfolios. At the most basic level, the fund is mandated to invest at least 80% of assets in stocks listed on the NASDAQ exchange. There are two areas of focus: 1) companies with long-term growth potential that operate in industries growing due to secular trends, and 2) those that could experience short-term earnings gains due to change factors such as management, restructuring, or new products. When candidates for purchase are found, the manager looks for the additional characteristics of low valuation and/or positive price momentum. Baker identifies the long-term trends he and his team follow that they expect will allow for “periods of greater-than-GDP growth for companies with appropriate exposure”, including: • E-commerce, expected to continue to take market share from traditional retailers. • Internet advertising, likely to account for a growing proportion of total advertising expenditures. • Cloud computing, offers the ability to reduce IT costs and improve efficiency. • Mobility, simply the growth and increased use of mobile devices. • Data, in the increasing use of data and analytics in areas such as marketing. • Personalized medicine, generally using genetic information to make treatment decisions. The NASDAQ mandate and the targeted secular trends ultimately lead to a portfolio that is very concentrated in technology and health care. Compared to the NASDAQ Composite, the fund is currently somewhat overweight in those areas, while underweight in financials and industrials. Compared to the large growth fund category, the fund has more than twice that of the average fund in technology, and less in consumer discretionary, consumer staples, energy, materials, and financial services. The top ten stocks comprise 42% of assets. The fund also holds an interesting private holding, Uber Technologies, which is a small position at less than 2% of assets. Davis notes that they “selectively make small investments in private companies.” Uber, which offers private, rideshare, and “black car” transportation via a smartphone app, is developing rapidly and according to Davis, is rumored to have about $2 billion in annual net revenue. Walter Frank, Moneyletter, www.moneyletter.com, 800-890-9670, February 2015
