The top five holdings in this small cap fund are: USS CO LTD (USSJF, 2.04% of assets); CTS Eventim AG & Co. KGaA (CEVMF.DE, 1.99%); Unite Group PLC ORD 25P (UTG.L, 1.90); OBIC Co Ltd (OBIIF, 1.76%) and Berendsen PLC ORD 30P (BRSN.L, 1.70%).
Fidelity International Small Cap Opp (FSCOX)
From Fidelity Monitor & Insight
For the past few years, our models have had little-to-no direct exposure to foreign stocks. That recently changed, when we purchased Fidelity International Small Cap Opp(FSCOX) for our Unique Opportunities Model.
As we said at the time, the move “reflects our improving view of international developed markets.” In addition to believing that the fund offers the long-term promise of capital appreciation, its smaller-cap holdings further diversified the model away from U.S. equities generally and, more specifically, to the large-cap stocks held by Blue Chip Growth and the fund we had traded out of, Export & Multinational.
While the model already had exposure to small-caps through Event Driven Opportunities and other funds, the addition of foreign small cap stocks should actually lower portfolio risk.
As its name partly suggests, International Small Cap Opp’s seeks out opportunities in both small-cap and mid-cap firms. The split is actually 47% to 51%. Its median market cap is $1.4 billion.
Since December 2008, Jed Weiss has managed the fund with a slight growth bias. (Its trailing price-earnings ratio is 19.0 versus 17.4 for its benchmark.) But because its geographic market is developed Europe, tech and biotech are not significant positions—certainly not relative to the U.S. small-cap market. Instead, consumer discretionary, financials and industrials are almost 60% of the fund’s assets—further diversifying our Unique Opp’s Model.
Jed (who also runs the larger-cap Int’l Growth) had a solid 2015 as this was one of Fidelity’s top-performing funds, gaining 10.1% versus 9.1% for its small-cap benchmark. And it smashed the more widely used (and large cap) EAFE index which fell 0.9%. Note: Fidelity’s foreign stock funds do not hedge away currency risk, as doing so is both expensive, not easy to get right, and lessens the benefits of diversifying abroad.
With Europe’s central bank stimulating its economy in many of the same ways that our Fed had done, economic growth should accelerate, and share prices should rise. That, coupled with this fund’s strong manager, help set the table for a promising 2016. Note: The fund has a 2.0% redemption fee on shares held fewer than 90 days.
Jack Bowers, John M. Boyd and John Bonnanzio, Fidelity Monitor & Insight, www.fidelitymonitor.com, 800-397-3094, February 2016