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Fund Watch

Fidelity New Millennium's Contrarian Bet Pays Off

Unloading high-flying tech stocks and scooping up out-of-favor energy picks has helped this Kiplinger 25 member beat the S&P 500.

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Back in 2014, Fidelity New Millennium (FMILX) fund manager John Roth described himself as an opportunistic stock picker. Now, more than nine years into a bull market, he says he’s become more of a contrarian. In mid 2017, Roth shed shares in high-flying tech stocks, including Alphabet, Apple and Facebook. In 2014 and 2015, as oil prices plunged, he loaded up on energy stocks.

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That last bet paid off over the past year as oil prices rebounded. Roth’s energy stocks, which make up almost 13% of the fund’s assets (double the energy stake in Standard & Poor’s 500-stock index), helped New Millennium, a member of the Kiplinger 25, our favorite low-fee mutual funds edge the S&P 500 by one percentage point over the past 12 months. Two firms were heavy hitters: Shares in Legacy Reserves (LGCY), an exploration-and-production company, soared 378%; ConocoPhillips (COP), another E&P firm, rose 70%.

Roth’s latest contrarian move was buying shares of General Electric (GE). He was drawn to the troubled conglomerate in early 2018 after the stock had dropped nearly 60% since mid 2016 and was “left for dead” by other investors, he says. But a turnaround seems possible. After GE played “whack-a-mole” to fix its problems for years, Roth says, it hired a new chief executive last year who is committed to streamlining the business. GE recently announced plans to spin off its health care business and sell its stake in oil-services firm Baker Hughes. “They’re finally unlocking value, finally admitting the firm has to break up,” says Roth.

New Millennium gives Roth a lot of latitude. He can invest in small, medium or large companies, based in the U.S. or abroad. These days, the fund has about 14% of its assets invested overseas, mostly in the U.K. and other European countries. Roth says he’s finding good opportunities, one company at a time, in “firms that people haven’t heard of.” Shares in HUB24, an Australian financial-services firm, have risen 95% over the past 12 months. Fevertree Drinks, a U.K. beverage company, is up 110%.

Since Roth took over New Millennium in 2006, he’s had several good years and a few lackluster ones. But over the past decade, he beat the S&P 500 by an average of more than half a percentage point per year.

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