What do you look for in a fund with a relatively
new manager?
The first thing is a track record at other funds that
indicates the manager has skill. Next, you want other
key fundamentals like low costs, high manager
investment, a good strategy, and a good fund company.
Looking at some of the shortest-tenured managers in
the Morningstar
500
, I was impressed by how many
had already stepped up to the plate to invest sizable
sums in their funds. I’ll walk you through some of
those examples and then step back to consider that
information in the context of other key data. Many are
more suited to your watchlist than your portfolio, but
some merit investment today.
First to $1 Million
Lionel Harris didn’t mess around. He’s the shortest-
tenured M
500
manager to raise his personal
investment above the $
1
million level. He did it only
a little more than one year into his time at
Fidelity
Small Cap Stock
FSLCX
. That’s a great sign of
commitment at his new fund. While this fund’s record
is pedestrian, Harris’ is not. He beat his small-cap
growth peer group by
181
basis points annualized in
six years at prior charge
Fidelity Small Cap
Growth
FCPGX
.
He’s dialed down his earnings-growth hurdles at
this fund but otherwise continues his strategy of
looking for strong management, solid cash flows, and
a diverse product lineup at companies he buys.
The fund is in our small-blend category but clearly has
some growth characteristics under Harris. In addi-
tion, the fund charges a reasonable
1.10%
.
Two other Fidelity funds are next on the list.
Fidelity
Equity Dividend Income
FEQTX
manager Scott
Offen and
Fidelity Magellan
FMAGX
manager
Jeffrey Feingold have invested more than $
1
million in
their funds in less than two years at the helm. In
fact, Feingold is the largest individual shareholder in
Magellan. As above, you have funds with poor
long-term records but managers with strong records
elsewhere. In addition, expenses are low.
However, Feingold and Offen had to alter the strategies
that brought them past success. Offen is plying
a more-disciplined dividend focus here than at
Fidelity
Value Discovery
FVDFX
, where he produced solid
returns by applying a free-range value strategy. At
Fidelity Magellan, Feingold has had to contend with a
far greater asset base than he did at
Fidelity Trend
FTRNX
, so it is not a surprise that he has more in mega-
caps. He also is shaping his fund around the
S
&
P
500
, whereas Fidelity Trend’s benchmark was the
Russell
1000
Growth. That means that Fidelity
Magellan has more in financials and energy than
Feingold has had historically.
Because of those relatively big changes, we give
Fidelity Magellan and Fidelity Equity Dividend Income
Morningstar Analyst Ratings of Neutral, though there
are certainly some encouraging signs.
We continue with the Fidelity theme as we go to
Fidelity Municipal Income 2015
FMLCX
, which
Continued on Page 2
New Fund ManagersWho
Are Enthusiastic Buyers of
Their Own Funds
Fund Reports
4
Dodge & Cox International Stock
First Eagle Overseas
Longleaf Partners International
Vanguard Total Intl Stock Idx
Morningstar Research
8
Where Big Allocators Are
Placing Their Bets
The Contrarian
10
Time to Nibble at Europe
and Japan?
Red Flags
11
Big Flows Small Caps
Market Overview
12
Leaders & Laggards
13
Manager Changes and News
14
Portfolio Matters
16
A Sample Bucket Portfolio
for Retirees
Tracking Morningstar
18
Analyst Ratings
Income Strategist
20
FundInvestor 500
22
FundInvestor 500 Spotlight
23
Follow Russ on Twitter
@RussKinnel
RusselKinnel,
Director of FundResearch and Editor
FundInvestor
April 2013
Vol. 21 No. 8
Research and recommendatio s for the s riou fund investo
SM
