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An Enlightened Approach From Fidelity The Contrarian | Russel Kinnel

firm like Wellington, you have managers grouped by strategies like value or growth, and they tend to work in a more team-oriented fashion. Not so at Fidelity. Witness the dramatic strategy changes over the years at a fund like Fidelity Dividend Growth FDGFX or even Fidelity Magellan FMAGX as each new manager brought a completely different M.O. Those are the sort of changes that give investors heartburn. You might have a new manager overnight, but his new strategy might not come into focus for a full year. What are you supposed to do in the meantime? Fidelity is now more sensitive to those issues. Besides this advance notice, the firm also has other funds where managers are running portions of funds or where whole teams of sector specialists are running funds. This, too, reduces the sort of unhappy surprises that investors hate. Seeing Fidelity’s efforts on this front makes me feel better about taking the plunge into one of their actively managed funds. I’d still look for the same fundamentals as always: good management, sound strategy, and low fees. And, of course, there are still challenges at Fidelity, such as asset bloat. In case you’re considering Fidelity anew, here are a few of our higher-rated actively managed equity funds (that are still open): Fidelity Contrafund FCNTX , Fidelity Low-Priced Stock FLPSX , Fidelity Large Cap Stock FLCSX , Fidelity New Millen- nium FMILX , Fidelity Leveraged Company Stock FLVCX , and Fidelity Mid-Cap Stock FMCSX . Not that I’d suggest buying just any old Fidelity fund. It still has a number of funds that we rate Neutral— often because the manager hasn’t been at the fund long enough to make the case for an investment. Such funds include Fidelity Dividend Growth, Fidelity Magellan, Fidelity Growth Discovery FDSVX , Fidelity Export & Multinational FEXPX , and Fid- elity Equity-Income FEQIX . œ Contact Russ Kinnel at russel.kinnel@morningstar.com

Fidelity quietly did something great. It named Gopal Reddy lead manager of Fidelity Advisor Growth Op- portunity FAGOX as of January 2015 . Reddy has been comanager since October 2012 . Manager Steve Wymer will exit the fund in March 2015 . It’s great news because it elevates Fidelity’s transitions to the level of Vanguard and T. Rowe Price, where we often get such news well in advance. This type of plan enables advisors, investors, and, of course, the fund managers to prepare for the shift. This means that if you own the fund, you have plenty of time to decide if you want to stay in or sell. If you want to sell, you can decide if you want to do it in this tax year or the next, so you can better manage your capital gains. It’s probably even more helpful for someone who was considering an investment. Now if you decide to buy something else, you won’t incur the load for no reason, nor will you have to start the research process all over again. These long-running transitions also make for a much better handoff. The future manager can become well-versed in the fund’s strategy and its holdings. There is often a gradual handoff of parts of the port- folio, though I don’t know if that will happen here. At Fidelity, manager transitions have been jarring at times as a new manager is announced at the date of the change. The new manager will quickly overhaul the portfolio and often apply a fairly different strat- egy. There are no guarantees, but this transition with a long lead time should generally lead to greater consistency in style.

Our Contrarian Approach I go against the grain to find overlooked funds that may be ready to rally.

Transitions are rough for Fidelity because managers have only loose affiliations with each other. At a