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Standard & Poor's


11/26/15 05:00:18 PM


One of the benefits of active management is that a portfolio manager or team can increase or decrease exposure to a stock for fundamental and/or valuation purposes. Unlike a passive ETF that tends to have more quarter-to-quarter consistency in its holdings and allocations, changes at active mutual funds is to be expected. As such, S&P Capital IQ thinks looking at the stakes on a large asset manager such as Fidelity Investments can be insightful.

Fidelity is the second largest active asset manager with $1.1 trillion in assets, second only to American Funds, according to Morningstar. During October, Fidelity pulled in $1.7 billion of fresh money into its active funds.

According to the Capital IQ database and using the September 30, 2015 13-F filing, Fidelity increased the stake in half of its 20 largest equity positions, while reducing the share count of the remainder. While information technology remained the largest overall sector exposure, at 20% of assets, management across various portfolios meaningfully sold shares in two tech heavyweights. During the third quarter, the share counts of Apple (AAPL 119 *****), Fidelity's largest overall position, and Microsoft (MSFT 54 ***) declined by 7.5% and 14%, respectively.

Since then, Apple posted fiscal fourth quarter EPS of $1.97 vs. $1.42, beating the Capital IQ consensus, aided by 22% sales growth. Meanwhile, Microsoft reported $0.67 adjusted EPS in the quarter ended September vs. $0.65 that was $0.08 above the Capital IQ consensus, as revenues fell 12%.

However, the share count in MasterCard (MA 100 ***) and Visa (V 80 ***) rose by 2.8% and 1.8%, during the same period. MA reported third quarter GAAP EPS of $0.86 vs. $0.87, missing the Capital IQ consensus estimate of $0.88. Meanwhile, V reported EPS of $0.62 vs. $0.55 in the quarter ended September, a penny below Capital IQ consensus.

Health care was the second largest sector, at 19% of assets, aided by a 7.5% increased share count in Medtronic (MDT 76 ****) and fractional increase in UnitedHealth Group (UNH 113 ****) that is partially offset by a 5.3% reduction in Gilead Sciences (GILD 107 *****).

The share count for consumer discretionary holding Disney (DIS 120 ****) was cut by 15%, the highest of any of the 20 largest recent positions, while fellow sector constituent (AMZN 668 ****) increased 7.2%, making it now the third largest overall position behind AAPL and Facebook (FB 107 ****). Consumer discretionary made up 16% of Fidelity equity data, according to Capital IQ data, behind technology, health care and financials. During the quarter, Fidelity decreased its stakes in Wells Fargo (WFC 56 ****) and J.P. Morgan (JPM 68 ****), by 6.5% and 3.5%, respectively.

Given the growth focus on many Fidelity funds, it is logical to us that telecom services and utilities were a combined 2.4% of assets.

Fidelity holds more than 6,000 global positions, with 558 additions in the third quarter. Examples of such additions were newly public companies such as PayPal Holdings (PYPL 36 NR), a spin off from eBay (EBAY 29 ***).

S&P Capital IQ provides rankings and research on more than 20,000 mutual fund shares classes based on performance, risk and cost factors.

Fidelity Contrafund (FCNTX 105 *****), a large-cap growth fund, has top-10 holdings in FB, AAPL, WFC AMZN, V and DIS (in order of weightings).

Meanwhile Fidelity Low-Priced Stock Fund (FLPSX 49 *****), a mid-cap core fund, has top-10 positions in MSFT and UNH, as well as Ross Stores (ROST 51 ****) and Unum Group (UNM 37 ****).

Both FCNTX and FLPSX rank as S&P Capital IQ five-star funds for the favorable valuation and risk characteristics of their respective holdings. The funds also have above-average three-year records combined with below average volatility.

S&P Capital IQ stock and mutual fund reports can be found on the MarketScope Advisor platform.


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