The top five holdings of this fund include Tesla Inc (TSLA, 8.51% of assets), Apple Inc (AAPL, 8.48%), Alphabet Inc A (GOOGL, 6.65%), Amazon.com Inc (AMZN, 5.54%) and Activision Blizzard Inc (ATVI, 5.20%).
Fidelity OTC (FOCPX)
From Moneyletter
While Fidelity OTC (FOCPX) falls into the large-cap growth category, the fund’s mandate is quite different from that of most of its peers. From the beginning, the fund was tasked with investing at least 80% of assets in stocks from the Nasdaq Composite Index or traded in the over-the-counter markets, with that index being the fund’s benchmark to beat.
The focus on the OTC markets generally results in a greater concentration in smaller names, and in technology and health care stocks. About 63% of the portfolio is invested in large-cap names, compared to over 80% for the category overall. Its mid-cap stake (22% of assets) is closer to the category average of 17%, but its small and micro holdings amount to 15% of assets, compared to only 2% for the large-cap average. And, Fidelity OTC’s technology stake of 48% dwarfs the categories’ 29% exposure.
Fund manager Gavin Baker describes the fund’s investment philosophy: “My philosophy is based on evidence that alpha—above-index, risk-adjusted return—derives predominantly from valuation price momentum and, most importantly, accurate estimation of future earnings power and free cash flow via fundamental analysis. I focus most on fundamental analysis, and I prefer to take a private equity approach to public growth stocks whenever possible. This typically results in extended holding periods [and] low name turnover among my largest holdings.”
He added that he also focuses on risk management, aiming to assume more risk from stock selection than sector bets or market timing. He also believes in concentrating assets in the best ideas. At the end of March, the top ten holdings accounted for 46% of assets.
Baker likes stocks that will benefit from sustainable growth factors such as new products or restructuring. And he invests in “simple, durable, secular trends” including artificial intelligence, cloud computing, internet advertising, personalized medicine, and E-commerce.
Some of the biggest contributors to 2017 performance are among the top ten holdings, including Activision Blizzard, Tesla, and Ubisoft Entertainment (63.1%, 59.6%, and 46.5% advances, respectively).
Walter Frank, Moneyletter, www.moneyletter.com, 800-890-9670, June 2017