Fidelity Equity-Income: Low-Key Value
The fund isn't a show-stopper, but manager Stephen Petersen produces solid returns by investing in undervalued, dividend-paying stocks.
Editor's note: This is part of a continuing series of articles looking at the 20 biggest no-load stock funds.
When it comes to managing money on an elephantine scale, Stephen Petersen is a whiz. Between Fidelity Equity-Income and his other charge, Fidelity Puritan, Peterson manages nearly $50 billion. For the past 13 years, Petersen has generated steady returns at Equity-Income using a simple formula: He seeks undervalued stocks with dividend yields greater than that of the S&P 500.
Not surprisingly, Petersen's fund is filled with big, well-known companies. The top three holdings were recently ExxonMobil (symbol XOM), Bank of America (BAC), and American International Group (AIG). In 2006, the fund's healthy stakes in energy, financial and telecommunications stocks helped boost its return to 17%, two percentage points more than the average fund that invests in large, bargain-priced stocks.
Once Petersen buys a stock, he tends to hang on tight. The fund's turnover is a low 19%, implying that he holds stocks for five years. Lately, Petersen has taken an interest in slumping technology and health care stocks, including Intel (INTC) and Johnson & Johnson (JNJ).
Equity-Income rarely produces show-stopping annual returns, but its long-term record is sound. The fund's 9% annualized return over the last decade lands it in the top 40% of its peers. Since Petersen began managing the fund in 1993, it has returned an annualized 11%, slightly ahead of the S&P 500. It has lost money in only two years (2001 and 2002) and has outperformed the index each calendar year since 1999. The fund currently yields 1.5%. Investors looking for a low-key, value-oriented fund should BUY Equity-Income.
Assets: $30.6 billion
Returns (vs. S&P)*
Expense ratio: 0.67%
*Returns to January 5
View updated data for this fund and compare the performance of the 20 biggest no-load stock funds.