Welcome, Fools, to part 34 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 International Discovery (FIGRX) |
|
|---|---|
|
Expense Ratio |
1.09% |
|
Fund Size |
$8.9 billion |
|
1-Year Return |
24.22% |
|
5-Year Return |
17.77% |
|
10-Year Return |
11.28% |
Top 5 Holdings
|
Company |
% of Assets |
|---|---|
|
Roche Holding |
1.53% |
|
UBS |
1.39% |
|
Novartis |
1.37% |
|
Nikkei 225 futures |
1.36% |
|
BP |
1.29% |
Meet William Kennedy
The fightin' team at Fidelity International Discovery is led by William Kennedy, who has led a variety of funds at Fido but, with all of them, has performed in the top 20% of his peer group.
That's why, even though Kennedy has led Discovery for less than two years, SmartMoney named the fund as one of its global picks last October. Eat that, Wall Street.
But performance only comes from superstantial effort, and Kennedy, not surprisingly, is a tireless worker. For example, in an interview with Fortune, Kennedy related how, during a recent trip to Japan, he awoke at 4:15 a.m. to dozens of voice messages from his analyst team. Did he mind? Of course not. "That's why I can own 300 names and keep on top of them," Kennedy told Fortune.
He's also willing to zig as others zag, even when doing so takes him from familiar territory. For example, even though Kennedy spent his formative years at Fido covering Hong Kong, India, and the rest of Southeast Asia, Discovery today has 67% of its assets invested in the U.K. and Western Europe. That's where he thinks the bargains are.
How he invests
It's also where the dividends are. Kennedy told Fortune that, on the whole, European large caps are offering 3% or better yields. The S&P 500, meanwhile, offers just 1.8% on average.
And Europe is cheaper. The 50 largest companies in Europe trade for just 12.5 times earnings. That's a steep discount to the S&P, which trades for 15.9 times earnings. By buying into the cheaper multiple, Kennedy hopes to be on the winning side of earnings surprises.
But he's also planning to invest where the growth is. As he said in a recent interview for an in-house publication, "I'm especially keen on long-term prospects in Asia, where consumer savings are growing at a rapid rate."
Color me unsurprised, then, that Kennedy is sticking it to the stateside stockinistas by adding to his stakes in Asian large caps Canon
Is this fund for you?
Could Kennedy be the next Peter Lynch? You'd think so, what with the uncommon respect afforded to him by the investapo in the old-school financial media. Fortune, for example, named International Discovery a top global fund for 2007 in its Christmas issue.
But, unlike Lynch, Kennedy is a confessed value investor. He's looking for firms with decent earnings growth, that are attractively priced, and which have the ability to beat investors' expectations. That's closer to what Brian Barish at Cambiar Opportunity, also a former international equities analyst, preaches.
Still, Barish is excellent company, and Discovery's 1.09% expense ratio is exceptional. So much so, in fact, that SmartMoney's other choice -- Polaris Global Value -- was added to Shannon Zimmerman's Motley Fool Champion Funds portfolio in the November 2005 issue and has been a solid market-beater since. (It's just one of many winners for Shannon. Want to see the rest? Click here to get 30 days of free access to Champion Funds.)
And that's today's profile. See you back here next week, fund nation. Good night.
For more Foolish coverage of fund-toting globetrotters:
- Asia is where it's at for G. Paul Matthews.
- Tag-team returns are just fine for investors in Dodge & Cox International Stock.
Think you can't beat the market with funds? Think again! The selections in Shannon Zimmerman's Motley Fool Champion Funds portfolio are up an average of 30% vs. just 18% for their comparable benchmarks. Ask us for an all-access pass to get an unfettered look at all of Shannon's picks, manager interviews, and model portfolios. Go ahead; it's free for 30 days and there's no obligation to subscribe.
Fool contributor Tim Beyers, ranked 318 out of more than 21,000 in Motley Fool CAPS, is a regular viewer of The Colbert Report. (Stay the course.) Tim didn't own shares in any of the stocks or funds mentioned in this article at the time of publication. Get the skinny on all of the stocks in Tim's portfolio by checking his Fool profile. The Motley Fool's disclosure policy is always championship caliber.
