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Williamstown, MA, United States, 2006/04/05 - The Fidelity Growth Portfolio seeks above-average returns by investing in Fidelity Funds, with the goal of 15% annual returns over the medium term. The following funds comprised the Portfolio as of March 31, 2006.
2005 : 9.79%
2004 : 12.67%
2003 : 39.45%
2002 : -14.40%
Fidelity Mid-Cap Stock 30%
Fidelity Fifty 25%
Fidelity Equity Income 25%
Fidelity Value 20%
*as of 3/31/06
The Fidelity Growth Portfolio seeks above-average returns by investing in Fidelity Funds, with the goal of 15% annual returns over the medium term. The following funds comprised the Portfolio as of March 31, 2006:
Fidelity Mid-Cap Stock
Portfolio allocation: 30%
YTD* : 11.5%
2005 : 16.1%
2004 : 9.1%
2003 : 33.3%
2002 : -27.6%
Monday’s most active stocks included: Lucent Technologies (NYSE: LU), Pfizer (NYSE: PFE), Time Warner (NYSE: TMX), iShares Japan Index Fund (AMEX: EWJ), Nortel Networks (NYSE: NT), General Electric (NYSE: GE), iShare Russell 2000 Index (AMEX: IWM), and Energy Select SPDR (AMEX: XLE).
Fidelity Mid-Cap Stock has undergone some surprising manager changes during the past year or so—but that hasn’t hurt shareholders’ returns.
FMCSX turned in strong performance under a series of managers during the past decade, which in turn led to strong asset growth: The fund held $11 billion in assets under management as of late March. Running such a large and growing mid-cap portfolio can be difficult. The manager either has to find an increasing number of attractive stocks in which to invest or must hold ever-larger positions in individual shares—a strategy that brings the risk that buying and selling the stocks will inordinately affect their values.
Fidelity named Shep Perkins portfolio manager here in January 2005, and two months later named Steve Calhoun, manager of Fidelity Aggressive Growth, as Perkins’ comanager. Calhoun was to invest his portion of this fund with a strategy identical to that of Aggressive Growth, effectively expanding the range of stocks in which Fidelity Mid-Cap Stock would invest. This comanagement arrangement effectively allowed the fund to spread its burgeoning assets across a larger number of stocks.
The fund generated strong returns following Calhoun’s appointment, gaining 14.8% between March 1 and August 31, 2005. It’s impossible to determine how much of those returns resulted from Calhoun’s picks—but the comanagement structure seemed to be working. Nevertheless, Fidelity announced in November that Calhoun would step down, leaving Perkins to run FMCSX solo.
That change doesn’t seem to have hurt performance. The fund gained 4.9% during 2005’s fourth quarter, and its 11.5% year-to-date return through March 27 places it in the top 6% of mid-cap growth funds tracked by Morningstar. But the management shift does renew concerns about the effects of this fund’s girth.
Funds with large asset bases often must increase the market capitalization of the stocks in which they invest, since larger stocks are less affected by the big trades that a hefty fund needs to make from time to time. Morningstar analyst Andrew Gogerty points out that FMCSX’s stake in mid caps slid from 81% in 2001 to only 57% as of late 2005. And the fund as of January 31, 2006, held almost 38% of its assets in stocks with market caps greater than $10 billion, while just 4.3% of the stocks in the benchmark were that large. That trend toward bigger shares pushed the fund’s weighted average market capitalization to $11.7 billion, almost three times the weighted average of the S&P 400 MidCap Index. The upshot: Fidelity Mid-Cap Stock increasingly resembles a larger-cap offering.
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That may not be a bad thing, however. Small- and mid-cap stocks have outperformed large caps since 2000, representing an unprecedented run of market dominance by smaller shares. Most analysts expect large caps to take the lead sometime in the near future, particularly given the tendency for larger shares to outperform in the type of modestly growing economic environment nearly all economists predict for the remainder of 2006.
In fact, Perkins’ move toward larger stocks may simply indicate that he finds bigger caps more attractive than the smaller fry. He looks for undervalued shares of firms that he thinks will be able to grow earnings faster than analysts’ estimates during the next three years. Given small and mid caps’ dominance during the past half-decade or so, such compelling values may simply be more common among bigger stocks.
The track record Perkins and his predecessors built at FMCSX is impressive: The fund’s 10-year annualized return of 13.3% through February places it in the top 10% of mid-cap funds tracked by Morningstar, and its returns held up far better than its category average during the bear market. Still, investors here should be aware that this fund might be bigger than its name suggests.
To learn more about Fidelity mutual funds, call (800) 548-3797 or visit the Fidelity Advisor website below. When you subscribe, you will receive 5 FREE Special Reports including the Best 4 Fidelity Funds for 2006 and the Best Bond Fund for 2006.