Wednesday February 20, 2013
by John Boyd, editor Fidelity Monitor & InsightLarge-cap growth funds remain our favorite choice. Small-cap growth funds should do better relative to large caps than last year, but they carry more risk. Among S&P 500 sectors, tech is the cheapest based on expected earnings growth, followed by consumer discretionary — two mainstays of many growth funds.
Blue Chip Growth (
FBGRX) has nearly 60% in those two sectors, while
Capital Appreciation (
FDCAX) has about 40%, with a bigger focus on consumer discretionary.
Meanwhile, we've added positions in
Value Strategies (
FSLSX), whose Manager Tom Soviero looks for companies with high levels of debt but improving fundamentals.
We've also added to
Small Cap Discovery (
FSCRX), a small cap blend fund with a more diverse mix of sectors, but where Manager Chuck Myers has outperformed 90% or more of his industry peers for the past 1, 3 and 5 years.
While we still think that the US offers the best risk/reward among global stocks, the overseas outlook for 2013 appears better. Europe has made significant strides in reducing the chances of a significant risk event, although the continent is a long way from solvent.
And the UK looks ready to come out of recession. The emerging market economies also seem to be ending their “growth recession.”
We expect stocks to beat bonds in 2013, but their returns are unlikely to be as robust as in 2012. Moreover, volatility is likely to remain high especially in the first few months of the year as Congress grapples with more fiscal issues. Try and remain calm throughout the turmoil and stick to your investment plan.
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