My Mutual Fund Picks - Part 1

A quick note about my fund picks - they are heavily biased towards Fidelity funds, and those available as NTF (no transaction fee) funds at Fidelity. Obviously, all of them are no-load funds.

Fidelity Balanced Fund (FBALX)
Moderate Allocation, FBALX has a conservative blend of about 60-65% stocks and about 30-35% of bonds. The stocks have the usual suspects - conservative value stocks such as Bank of America, Citigroup, JP Morgan, Altria, General Electric, Proctor and Gamble etc. But its a Fidelity fund - chasing high energy growth stocks is a natural instinct. Therefore no surprises to see the growth stocks in there - especially in the energy space - Valero and National Oilwell Varco (this is infact the #1 equity holding for this fund!!). Its rated as a 5-star fund by Morningstar - and a solid reputation to boot. If there is only mutual fund I had to buy, this would be the one.

Fidelity Contrafund (FCNTX)
Largecap Growth, FCNTX is now closed to new investors, and has been heavily criticized for asset bloat (more than $60B in an actively managed fund!!). But it does have a super star fund manager - William Danoff. So till then, it continues to get attention and a second look.

Fidelity Select Energy (FSENX)
Only sector-specific fund in my list. Many folks will not like owning a sector specific fund, and I myself am not a big fan of this. But hey, I think this sector will be a long term story to look at - I mean look around, we are not suddenly going to switch to solar and wind powered stuff, and oil availability is not increasing at an alarming rate. So energy is a long term hold for me - but you need an appetite for volatility. Extremely volatile sector, and not for the weak-hearted. Ofcourse, both the above listed Fidelity funds have reasonably large energy weightings, so I didn't really need a separate energy fund. But the heart aches last year at the gas pump motivated me to try and build a hedge against it. If I pay at the pump, so I shall hopefully recover some of it in the stock market. And if oil prices go down, I will pay less at the pump - even though the oil stocks will slide as well.

Julius Baer International Equity II (JETAX)
JETAX was launched as a successor to the highly successful international fund Julius Baer International Equity (BJBIX) on the very same day that BJBIX was closed to new investors. It had the same fund managers, and the same philosophy as BJBIX. Its main investments are in diversified international markets (as of Dec 31, 2006 - Europe was ~50%, Emerging Markets ~ 21%, Japan ~ 8%, UK/Ireland ~ 12%, and Asia ex-Japan ~ 1.6%), and it differs from BJBIX in that it cannot invest in small caps (which it defines as $2.5 billion in market capitalization). That strategy had allowed fund managers Rudolph-Riad Younes and Richard Pell to achieve very good success at BJBIX. After about a year or so since inception, JETAX has continued to provide solid results, and has outperformed its benchmark index. It has made key plays in Eastern Europe (Poland, Hungary, Turkey etc.). Another similar fund is the highly successful William Blair International Growth (WBIGX) - also closed to new investors.

Mathews India Fund (MINDX)
A good solid India-focused fund - about a year and half old as I write this. Its expense ratio has been coming down and it is a no-load fund (unlike the other India-centric funds from Eaton Vance, ETGIX and EMGIX). So even with the fund underperforming the BSE Sensex, it is still good one to have - especially given the Indian growth story. MINDX has the BSE-100 as its benchmark and invests in both large and mid-cap stocks (most emerging market funds will have one or more of Bharti, Infosys, Tata Motors, Wipro, TCS, HDFC Bank, ICICI Bank) - but MINDX extends beyond the usual suspect, and owns Dabur Pharma, Glenmark Pharma, Ashok Leyland, etc. But be prepared for volatility, the Indian market is extremely (and I mean that!) edgy, it can swing up and down with a ferocity that is certainly not for the weak of heart. But the long term story for India continues to be bullish, and so the way to play MINDX would be to buy the minimum and slowly increment on a regular basis. Exploit automatic investing for dollar cost averaging.

One more point that has come up with MINDX - an alternative to MINDX would be to invest directly in Indian mutual funds (in rupees), which outperform MINDX - but I prefer to hold my picks in $, rather than in rupees (even though the dollar has really gone down against the rupee in recent times). So consider repatriability issues if you are an Indian guy considering investing in the Indian market.

Royce Value Plus Service (RYVPX)
This is a small-cap fund - and although the name says 'value', its clearly a growth-oriented fund and its Morningstar rating box shows it as such. Its a very solid pick - Morningstar rates it as 5-star, and SmartMoney.com picked RYVPX as its pick for the top small-cap pick of 2006. Marketwatch also likes the fund's managers Whitney George and James Skinner, and has RYVPX among its picks for top-performing low-cost mutual fund options for 2007.

The Oakmark Select Fund (OAKLX)
Oakmark Select is a fund with a concentrated selection of value stocks. It has not had a great run through the bull run of 2003-05, but has enjoyed a solid rebound in the second half of 2006. The fund continues to be highly recommended mainly because of star fund manager Bill Nygren, a favorite with Morningstar analysts, and who successfully navigated the investors through the rough seas of recession following the dotcom bust. Nygren has a reputation of being a 'buy and hold' investor - this can be judged from the fact that in 10 years since inception, OAKLX has held only 80 stocks, and still holds Dun and Bradstreet (DNB), which was one of the 18 holdings with which he started the fund. As the economy slows down, and the market volatility increases, Nygren's value picks may come back into style again!

More picks coming soon .....

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