The top five holdings of this balanced fund are: Apple Inc. (AAPL—2.75% of assets), US Treasury Note (0.875%), Bank of America Corporation Com BAC—1.51%), Fannie Mae 3.5% 30 Year N/A (1.39%), and Wells Fargo & Company Common St (WFC—1.37%).
Fidelity Puritan (FPURX)
from The No-Load Fund Investor
Fidelity Puritan (FPURX) is a balanced fund with a ‘neutral’ allocation of 60% equities/40% bonds, but its manager has the ability to overweight equities by as much as 15 percentage points. The manager is currently taking 12 percentage points of the neutral fixed-income allocation and adding them to the allocation in equities, to 72%.
Fidelity’s senior investment professionals believe as a group that low current levels of interest rates render investment-grade bonds unattractive on a risk/reward basis.
The fund focuses on large-cap growth stocks, with average market capitalization of about $55 billion. The equity portfolio has a price/earnings ratio on trailing 12-month earnings of almost 20. The average historical corporate earnings growth for Puritan is 17.1% annually.
The fund is diversified, with about 260 different stocks and thousands of bonds.
Healthcare (mainly pharmaceuticals and biotechnology) was the fund’s biggest equity overweight at the end of June: 16.9% of assets, vs. 13.3% for the S&P 500. Information technology (mainly software & services), the largest equity sector within the fund and the index, was the next most outsized: 20.3%, vs. 18.8%.
Manager Arani and his two co-managers have been adding to the fund’s exposure to the energy sector, believing that it offers an increasingly rare combination of favorable growth prospects given the current phase of the economic cycle, along with reasonable valuations. Meanwhile, they have been trimming exposure to the broad consumer-discretionary sector, believing that the best time of the economic cycle for these companies has passed. The fund is modestly underweight in the financial services and consumer staples sectors.
Arani et al. invest in companies with market capitalizations greater than $10 billion. They seek companies that will differentiate themselves from market expectations through earnings-per share growth and outperformance, improving return on invested capital, capital efficiency, and free-cash flow (i.e., annual cash profits that need not be reinvested in the business).They also attempt to add to returns through high yield debt, which was recently about 16% of the fixed income portion.
The fund has an expense ratio of only 0.58%, which is very low for actively managed balanced funds, and a low minimum investment requirement of $2,500.
Mark Salzinger, The No-Load Fund Investor, 800-706-6364, September 2014