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Better Know a Stock Picker

Tim Beyers
December 14, 2006

Welcome, Fools, to part 29 of our several-thousand-part series, "Better Know a Stock Picker," which is loosely, but not too loosely, based on Stephen Colbert's "Better Know a District" from The Colbert Report.

Like Stephen and his thorough investigations into America's congressional districts, each week I take a look at a fund you may want to own. What's on tap this week?

Fidelity Low-Priced Stock (FLPSX)

Expense ratio


Fund size

$38.8 billion in assets

1-year return


5-year return


10-year return


Source: Fidelity

Top 5 holdings


% of Assets

Petroleo Brasiliero (NYSE: PBR  )


Safeway (NYSE: SWY  )


D.R. Horton Incorporated (NYSE: DHI  )


Health Management Assoc. (NYSE: HMA  )


Next Group plc


Source: Morningstar

Meet Joel Tillinghast
The fightin' team at Fidelity Low-Priced Stock is led by Joel Tillinghast, who was named Morningstar's domestic stock fund manager of the year in 2002, and was also just recently named one of the 10 best mutual fund managers around.

Color me unsurprised. Tillinghast, who's been at the helm of Low-Priced Stock since 1989, sticks it to Wall Street's stockinistas by buying cheap small caps that boast competitive advantages and predictable revenue. He and his team have found 700 worth owning so far.

To some, that would seem to be extreme diversification. Not Tillinghast. He told Morningstar in 2003 that Low-Priced Stock's broad-based portfolio has "kept us from being hurt by blowouts." Besides, his mentor, Peter Lynch, owned more than 1,200 stocks in Fidelity Magellan (FUND: FMAGX  ) .

Like Lynch, owning hundreds of winners has aided Tillinghast's performance. Low-Priced Stock has beaten the small-cap Russell 2000 index by more than 5% annually over the past 10 years. And he's winning again this year -- 17.73% vs. 17.43% as of Nov. 30 -- despite having $38 billion to put to work. Eat that, Wall Street.

How he invests
Tillinghast's secret? Doubling down when it makes sense to do so. Consider hospital operator Health Management, which he's been glowing about since at least 2003. Back then, Tillinghast told Morningstar that the firm sported "uninterrupted earnings" since its IPO and was introducing needed facilities in the West -- zigging as others were zagging. The stock is up 22% since.

And Low-Priced Stock still owns some shares Tillinghast bought in 1989. Talk about commitment. Or maybe it's that Tillinghast realizes that the classic Wall Street don't-bother-me-I'm-trading hamster wheel leads to higher costs and lower returns. Shocking!

Whichever is the truth, Tillinghast likes bargains he can hold for the long haul. Among his recent favorites: Dollar General (NYSE: DG  ) , Bed Bath & Beyond (Nasdaq: BBBY  ) , and ConocoPhillips (NYSE: COP  ) .

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