Newsletters Put Fidelity In Spotlight
BOSTON — With more than 200 mutual funds to choose from, thousands of Fidelity Investments' customers are crying out for help.
As many as 190,000 of them currently subscribe to one of four independent newsletters to help them decide which Fidelity funds to put their money in, and when to switch.
Except for one such newsletter on Vanguard products, no other fund company can boast a newsletter - let alone four - devoted exclusively to its products.
Two publications - Morningstar Mutual Funds and The Value Line Mutual Fund Survey - offer guidance on the whole realm of mutual funds.
And, like most fund companies, Fidelity itself offers a wealth of information about its products, including a massive Internet site. It's entirely possible to be your own expert - if you have the time and the talent. Fidelity staff can help you somewhat in your planning, as can other financial advisers.
But Fidelity won't tell you how to manage your account - unless you have a minimum of $200,000 to turn over to their experts. And in that case you give up your say of how it should be managed.
Each of the newsletters presents monthly at least four model portfolios of Fidelity funds, ranging from aggressive to conservative. Two of the newsletters offer telephone hot lines for more frequent tips on their model portfolios. The newsletters also discuss trends at Boston-based Fidelity and in investments in general.
Subscription costs range from $49 to $177.
Eric Kobren's Fidelity Insight was one of four investment letters out of several hundred that made the 1995 Forbes/Hulbert honor roll. Forbes Magazine and Mark Hulbert, who maintains a database of investment letters' gains and losses (based on model portfolios), combine forces for this yearly rating, last published Feb. 26.
Another Fidelity letter, Fidelity Monitor, actually showed much higher annual gains in the Hulbert ranking than Fidelity Insight. Editor Jack Bowers says not making the honor roll was a "fluke." He was in business all of 1987, he points out, so the crash in the market that year kept him off the honor roll - which takes into account averaged gains and losses over the years. Kobren's letter started just into 1987, so his results for that year are not counted at all.
Risk and return
Kobren's advice has led to 12 percent average annual total return since 1990, just over half of Mr. Bowers's 21 percent gain. But Fidelity Insight was rated low risk, versus "average" for Fidelity Monitor. The latter posted a Sharpe ratio, a combined measure of performance and risk, of 1.7. Fidelity Insight, at 1.2, was also good, but not as good.
The other two Fidelity letters, Fidelity Independent Adviser and Fidelity Forecaster, are too new to be ranked by Hulbert.
Mr. Bowers is a contrast in styles to Kobren. Bowers lives in suburban Sacramento, Calif., and is a former engineer at Hewlett Packard. He is completely self-taught in investments. Kobren, with 50 employees to Bowers's six, started on Wall Street after getting his master's degree in business at New York's Columbia University. His operation is based in Fidelity's backyard, near Boston.
Kobren's letter is so influential with large Fidelity investors that his recommendations can cause trouble for Fidelity fund managers if he gives a thumbs down or up. He usually gives the managers a one-day heads up if he's making a heavy recommendation "so they can get ready for the cash flow," says Kobren, himself a former money manager.
Bowers says "Kobren has sometimes sold cheap investments too soon" and missed out on the cheap-to-dear cycle, by which Fidelity has made so much money with its value-driven stock-picking style.
Bowers sees the current runup in the stock market as cash driven, and he says the blue chips are actually overvalued and will come down in price over the next several years. "That's when Fidelity's approach to investing - buying newer, undervalued stocks - will pay off well for patient investors."
Two newer letters
The two other letters, while new, are not to be sniffed at. Donald Dion Jr., editor of Fidelity Independent Adviser, has managed his family's investment firm, with assets mostly in Fidelity, for 20 years. He is an attorney and accountant.
The newest letter, Fidelity Forecaster, is put out by the Institute for Economic Research, which publishes the respected Mutual Fund Forecaster (rated highly by Hulbert) and the magazine Mutual Funds Modeling. This new Fidelity newsletter will also carry information on Fidelity's annuity products, an area the institute's Norman Fosback says is not written about.
Why Subscribe? To Help You Navigate Mutual-Fund Universe
Eric Kobren, editor of Fidelity Insight, sees several reasons investors should consider subscribing to such newsletters:
* Funds often don't do what they purport to do, so they need watching. A fund's assets might grow too rapidly, causing the manager to change the nature of his investments.
* Transaction and management fees, fund managers, and even a fund's investment rules and objectives can be changed.
* Novice investors tend to buy last month's big winners, but deeper analysis is needed.
* New funds often come along, which also need professional evaluation.
The Fidelity Watchers
Fidelity Independent Adviser
Published by Mutual Fund Growth and Income Association in Williamstown, Mass.
Price: $97 per year
Telephone: 800 539 5592
Published by the Institute for Economic Research in Deerfield Beach, Fla.
Price: $49 per year
Telephone: 800 338 4526
Published by the Mutual Fund Investors Association Inc., in Wellesley, Mass.
Price: $177 per year
Telephone: 800 586 4727
Published by Independent Investors Inc., of Rocklin, Calif.,
Price: $96 per year
Telephone: 800 397 3094