Tag Archives: mutual funds

Fidelity Low-Priced Stock Fund Just Keeps Chugging Along

Summary FLPSX has been a steady long-term performer easily beating its benchmarks. FLPSX is a low beta fund with a high Sharpe ratio. You get a 900+ stock globally diversified portfolio with a reasonable expense ratio. Overall Objective and Strategy The primary objective of Fidelity Low-Priced Stock Fund (MUTF: FLPSX ) is to seek capital appreciation by investing 80% of its assets in low-priced stocks (at or below $35), which often leads to investments in small- and mid-cap securities. It invests in both growth and value stocks. The fund looks for high-quality, growing companies that trade at bargain prices – e.g. companies with strong balance sheets and good free cash flow yield. Joel Tillinghast, who has managed the fund for over 25 years, has been quoted as saying “I’m only interested in stocks selling for 12 or 14 times earnings or less.” Fund Expenses The expense ratio for FLPSX is 0.82%, which is reasonable for a well-managed, global equity fund. The fund discourages active trading and is designed for long-term investing. It is a no-load fund, but it assesses a 1.50% redemption fee if the fund is held for less than 90 days. Minimum Investment FLPSX has a minimum initial investment of $2,500. Past Performance The fund is classified by Morningstar in the “Mid-Cap Value” or MV category. Compared with other mutual funds in this category, FLPSX has performed quite well. Here are the long-term performance figures computed by Morningstar: FLPSX Category (MV) Category Rank 15 Year 12.32% 8.76% 2% 10 Year 9.03% 7.32% 11% 5 Year 15.69% 14.08% 21% 3 Year 19.02% 18.11% 36% 1 Year 5.64% 1.16% 12% YTD 3.52% -0.34% 6% Source: Morningstar Mutual Fund Ratings Lipper Ranking : Funds are ranked based on total return within a universe of funds with similar investment objectives. The Lipper peer group is Small Cap. 1 Yr #520 out of 1,438 funds 5 Yr #431 out of 1,100 funds 10 Yr #174 out of 786 funds Morningstar Rating : Category is Mid-Cap value Overall 4 stars out of 429 funds 3 Yr 4 stars out of 429 funds 5 Yr 4 stars out of 370 funds 10 yr 4 stars out of 242 funds Fund Management Joel Tillinghast has been the primary fund manager since 1989. Over his 25+ years running the fund, it has beaten the Russell 2000 by a wide margin. After graduating from Wesleyan, he briefly worked for Value Line before being hired by Fidelity. FLPSX owns over 900 stocks and people at Fidelity have said that Tillinghast knows the details on every one of them. There is a large support team of six additional analysts who were hired to assist Tillinghast in 2011 when he took a brief leave of absence. Over time, the other analysts are taking over larger portions of the portfolio management. Top Ten Holdings (as of June 30, 2015) UnitedHealth Group (NYSE: UNH ) Next PLC Seagate Technology (NASDAQ: STX ) Best Buy (NYSE: BBY ) Microsoft (NASDAQ: MSFT ) Ross Stores (NASDAQ: ROST ) Metro, Inc. ( OTCPK:MTRAF ) Barratt Developments PLC ( OTC:BTDPY ) Unum Group (NYSE: UNM ) Aetna (NYSE: AET ) Asset allocation (as of June 30, 2015) Domestic Equities 54.75% International Equities 36.25% ——-Developed Markets 29.01% ——-Emerging Markets 7.24% Bonds 0.01% Cash 8.99% Fund Characteristics versus the Benchmark Index Valuation Portfolio Index Price/Earnings (1-Year Forecast) 14.1x 20.0x Price/Book 2.0x 2.3x Price/Cash Flow 10.4x 15.1x Return on Equity (5-Year Trailing) 16.2% 9.3% Comments Fidelity Low-Priced Stock Fund was first launched in December 1989 as a small-cap fund, and originally it required most new holdings to sell for $15 or less. It had a great record the first few years out of the box, and it attracted a lot of assets. Eventually, as assets under management grew, the price cap was lifted to $35, and the fund now owns more mid-cap and large-cap holdings. FLPSX is definitely not a benchmark hugger and owns many foreign stocks that are very small and have little analyst coverage. Some of the small foreign holdings do not even publish information in English. It also has large positions in Microsoft and UnitedHealth Group which are definitely not mid-cap stocks. One of the best features of FLPSX is its low volatility. Fidelity reported a recent beta of only 0.58 as of June 30. Because of the low beta and good performance, the fund has a high Sharpe ratio of 2.01, which measures return per unit of risk. I first purchased FLPSX back in 1990, and have been very pleased with its long-term performance. I only wish my initial purchase had been much larger. Because it is such a steady performer, it is the kind of fund you can buy and put away for the long term. Fund turnover is generally pretty low, so it can be a good holding for a taxable account or an IRA. I always find it interesting to read Joel Tillinghast’s quarterly performance reviews where he discusses which fund holdings added or subtracted from the fund’s performance. He also discusses how various sectors have done around the world. Disclosure: I am/we are long FLPSX. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

4 ETFs Unexpectedly Rocked By China Turmoil

After stabilizing for three weeks, the Chinese stock market resumed its decline, with the Shanghai Composite Index tumbling nearly 8.5% in Monday’s trading session. This represents the biggest one-day drop in more than eight years. The index extended its losses, falling nearly 4% early in Tuesday session. The massive plunge came following the disappointing manufacturing numbers that reignited fresh concerns of a slowdown in the world’s second largest economy. This is especially true as the flash Caixin/Markit China Purchasing Managers’ Index (PMI) surprisingly dropped to a 15-month low of 48.2 in July from 49.2 in June. This is also the fifth month in a row when PMI is less than 50. The sharp selloff was not only confined to China but spread worldwide with rough trading in the Asian, European, and U.S. markets. Additionally, it added to the concerns for the emerging markets, which already fear a Fed rate hike later this year, leading to sliding currencies. Further, as China is the world’s largest consumer of raw materials, the slump in the economy has stressed key commodity prices like copper, oil and gold. In fact, the Thomson Reuters CRB commodities index fell to the lowest level in six years. While there have been losers in every corner, we have highlighted four ETFs that were unexpectedly crushed by the China turmoil in Monday session. Interestingly, none of these actually belong to China but are indirectly tied to it. Guggenheim Solar ETF (NYSEARCA: TAN ) This ETF targets the global solar industry by tracking the MAC Global Solar Energy Index. It holds 29 securities in its basket with the largest allocation going to the top firm – SunEdison (NYSE: SUNE ) – at 8.2% of total assets. Other firms hold less than 7% share. Chinese firms dominate the fund’s portfolio at nearly 46.7%, followed by the U.S. (37.4%) and Canada (5.4%). The product has amassed $302.9 million in its asset base and trades in solid volume of around 275,000 shares a day. It charges investors 70 bps in fees per year. The fund lost 2.5% on the day but is up 1.4% in the year-to-date time frame. Global X Central Asia & Mongolia Index ETF (NYSEARCA: AZIA ) This fund provides exposure to 21 stocks of Central Asia that derive revenues or are traded in Mongolia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan or Uzbekistan. This is easily done by tracking the Solactive Central Asia & Mongolia Index. The product is highly concentrated on the top five firms at 40.4%, while energy and basic materials take the top two spots in terms of sector with roughly one-third share each. This is an unpopular and illiquid ETF in the emerging market space, with AUM of just $2.4 million and average daily volume of around 2,000 shares. Expense ratio came in at 0.69%. AZIA shed about 2.9% on the day and has lost 8.9% so far this year. Global X Copper Miners ETF (NYSEARCA: COPX ) This ETF targets the copper mining industry across the globe and follows the Solactive Global Copper Miners Index. Holding 23 stocks in its basket, it is highly concentrated on the top firm – Sandfire Resources ( OTC:SFRRF ) – at 8.7% while other firms hold no more than a 5.94% share. In terms of a national breakdown, Canada takes the top spot with 30% of assets, while Australia, Mexico and United Kingdom round out the next three spots with double-digit exposure. The product has managed $18.3 million in AUM while charges 65 bps in fees per year. It trades in light volume of 36,000 shares a day on average. The fund lost about 4.5% on the day and has piled up a huge loss of over 25% for the year so far. iPath Pure Beta Industrial Metals ETN (NYSEARCA: HEVY ) This note seeks to match the performance of the Barclays Commodity Index Industrial Metals Pure Beta Total Return Index, which is composed of five futures contracts on industrial metals. Four futures contracts (aluminum, nickel, copper and zinc) are traded on the London Metal Exchange and the other (copper) is traded on the COMEX division of the New York Mercantile Exchange. Unlike many commodity indexes, this product can roll into one of a number of futures contracts with varying expiration dates, as selected, using the Barclays Pure Beta Series 2 Methodology. The ETN manages just $0.5 million in asset base and sees paltry volume of about 300 shares a day, suggesting additional cost beyond the annual fee of 75 bps per year. The note lost 7.2% on the day, bringing the year-to-date loss to 12%. Original Post

EXG: The Distribution Is Your Return

Eaton Vance Tax-Managed Global Diversified Equity Income Fund is a mouth full of a name. It isn’t a bad fund, but your return is largely coming from distributions. That may not be a problem for you, but it is something you’ll want to keep in mind. A reader recently mentioned the Eaton Vance Tax-Managed Global Diversified Equity Income Fund (NYSE: EXG ), a fund I haven’t written much about yet. Since I have examined some of this fund’s brethren at Eaton Vance, I figured it was time for a deep dive on EXG, too. At the end of the day, it’s a mixed bag. What’s it do? EXG is a globally diversified option income fund. However, global primarily means developed markets. So the United States and Europe make up roughly 90% of the fund. And the fund’s Asian exposure is primarily in Japan. This is probably the best course of action for a fund that intends to sell options on its holdings with the goal of producing enough current income to support a managed distribution policy. You just need to keep in mind that emerging markets don’t play much of a role here. In addition to investing globally and writing options, the fund also strives to reduce taxes by using such techniques as tax loss harvesting and extending holding periods to at least a year. On one level it’s nice to know that these are a key focus for the fund, on another it seems like such strategies should be the norm for every fund, closed-end or open-end. But I don’t consider this a deal breaker or maker for EXG, it’s just another fact to know. What your return looks like Looking at total return, EXG isn’t a bad fund at all. The fund’s annualized return was 10% over the trailing three- and five-year periods through June. That trails the S&P 500 index and the Vanguard Global Equity Fund Investor Shares (MUTF: VHGEX ) over those spans. However, investing in the S&P or VHGEX would have left investors with yields in the low single digits. EXG’s distribution yield is in the high single digits. So there’s a trade off. And that’s an important thing with EXG. The distribution, especially over the last few years, has been the main source of your return. For example, the fund’s net asset value was $12.30 at the start of the company’s 2010 fiscal year (years end in October). It fell to $10.22 by the end of fiscal 2011 before rebounding to $10.82 at the start of fiscal 2014. It has since been in a downtrend again, recently hitting $10.50 or so. The recent NAV compared to $12.30 isn’t a flattering comparison. However, since 2011, the NAV has been fairly consistent. That, not surprisingly, coincides with a trimming of EXG’s distribution. Effectively the distribution was eating away at NAV, basically destructive return of capital, and Eaton Vance took steps to change that dynamic. For the fund that was a good decision and has clearly been an important part of stabilizing the fund’s NAV. But the second take away here is that the distribution has basically provided nearly all of the return the fund has offered in recent years. If you are looking for income that may not be a bad thing. However, EXG’s 9%+ distribution yield pretty much means you shouldn’t expect much capital appreciation from this fund. And if you are looking for a mix of income and capital appreciation you’re probably best looking elsewhere. Some more things to consider EXG’s expense ratio is roughly 1.07%. While that’s expensive compared to Vanguard’s products (VHGEX, for example, has an expense ratio of around 0.6%) and exchange traded funds, it’s not outlandish for an actively managed fund that invests globally. So it isn’t cheap to own, but nor is it expensive. Interestingly, EXG’s standard deviation is below that of VHGEX by nearly 10% over the trailing five-year period. However, that makes sense based on the fund’s use of option. Essentially, they will help protect a fund from losses because option premiums will offset stock declines. To whit, EXG was down roughly 27% in 2008. VHGEX declined nearly 47%. But options will also hamper returns on the upside, too, since positions with options written on them can be called away. Which is why in 2009 EXG advanced 23% and VHGEX was up a more impressive 33%. EXG’s trend of smaller losses and smaller gains is the norm between this pair. That said, if you are worried about the level of the world’s stock markets, EXG is a way to stay in the game while at least potentially protecting yourself from a severe downdraft. Good for some, not for others At the end of the day, I think EXG is an OK fund. I’m not so excited about it that I think everyone should own it, but for the right investor it could make a lot of sense. The big thing to remember, however, is that the yield is your return. That could turn into an issue if there’s another big market decline. With the NAV stuck in neutral for several years, a market-driven decline in NAV would make it harder to sustain the current payout. So, if you do step aboard here for global exposure, make sure to watch the NAV closely. Eaton Vance has proven willing in the past to trim distributions to protect NAV and I would expect them to do so again. As for premiums and discounts, EXG’s recent discount is narrower than its three- and five-year averages. Thus it isn’t a good candidate for investors looking to play closed-end fund premiums and discounts. So, for income investors looking for global exposure, EXG is worth a look. That’s especially true if you are concerned about the potential for a global market sell off. But EXG probably shouldn’t be the only fund you consider. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.