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Wednesday December 12, 2012
Fidelity: Investing with Soviero
by Jack Bowers, editor Fidelity Monitor & Insight Two stock funds managed by Thomas Soviero -- Value Strategies (FSLSX) and Leveraged Company Stock (FLVCX) -- are currently in the mid-cap value category, and their top sector holdings are consumer discretionary (21-22%) and materials (13% weighting for both funds). Leveraged Company Stock is a play on companies that issue large amounts of debt. A couple of decades ago, Fidelity discovered that the research coming out of its high-yield bond group worked better than traditional stock research for these firms (survival alone often can mean strong performance when it comes to turnaround plays, and that’s what credit analysts do best). As you might expect, a fund like this takes a beating in a credit-driven crisis. It lost over half its value in the 2008 financial meltdown, and was hit hard again last year as the Euro-debt crisis again roiled the shares of heavily-indebted companies. But in both cases, good stock research kept the fund from being saddled with big bankruptcy losses. So even though the last four years have been tough, the fund’s 10-year track record is one of the best in the industry (an average annual gain of 14.6% vs. 6.4% for the S&P 500). Going forward, Leveraged Co. remains a risky bet, with volatility some 50% greater than the S&P. (We rate it OK to Buy.) Fidelity Value Strategies, a Buy-rated fund, is our favorite of the two, because it has the lower energy weighting, while including a significant stake in the recovering financial sector. While Soviero has only been at the helm for the last two and a half years, his performance at this fund has been similar to that of Leveraged Co. Stock, where he has a strong record that stretches back almost a full decade. With overall risk that’s one-third greater than the S&P 500, Value Strategies is certainly not for the faint of heart, but compared to Leveraged Co. Stock it offers Soviero’s astute stock picks with a little less downside exposure. Learn more about this financial newsletter at Jack Bower's Fidelity Monitor & Insight. Related articles: 
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