Advertisement
investing

Fidelity OTC Fund Pays Big for Fast-Growing Firms

Winning picks for this growth-oriented fund include the popular stocks of Tesla and Facebook.

Stocks have performed marvelously over the past year, notwithstanding the market’s slide in early 2014. But some have done better than others. Electric-car maker Tesla (symbol TSLA) surged nearly 400%, biotech firm Illumina (ILMN) tripled, and social-media darling Facebook (FB) doubled. They and other growth stocks helped Fidelity OTC (FOCPX) land in the top 1% of its category over the past year.

Advertisement - Article continues below

No one will mistake OTC’s manager, Gavin Baker, for a classic bargain hunter. While the overall stock market sells for 15 times forecasted 2014 earnings, Tesla trades at a kingly 110 times estimated earnings; Illumina and Facebook trade at the more princely levels of 70 and 50 times earnings, respectively. These are prices Baker is willing to pay for what he calls “companies that are defining the future.”

Baker doesn’t totally ignore price, though. Potential investments (he mostly trolls the Nasdaq Stock Market) must have strong earnings growth and strong share-price momentum or must trade at a price that’s inexpensive relative to a company’s earnings, sales or dividends. Momentum firmed the case for Tesla, for example, when Baker picked up its shares in 2010. Microsoft, by contrast, is a stock he owns because it’s cheap.

After Baker buys, he sets price targets, but he doesn’t always sell a stock once it hits the goal. That’s because, he says, targets are not always useful when it comes to the fast-growing companies he owns. The fund has a turnover ratio of 116%, implying that Baker holds each stock for a bit less than a year, on average.

Advertisement
Advertisement

Most Popular

What Trump's Payroll Tax Cut Will Mean for You
Tax Breaks

What Trump's Payroll Tax Cut Will Mean for You

President Trump issued an executive order to suspend the collection of Social Security payroll taxes. How much could it save you?
August 13, 2020
8 Things You Must Know About Retiring to the Carolinas
retirement

8 Things You Must Know About Retiring to the Carolinas

From the mountains to the beaches, North Carolina and South Carolina offer retirees plenty of incentives.
August 14, 2020
7 Surprisingly Valuable Assets for a Happy Retirement
happy retirement

7 Surprisingly Valuable Assets for a Happy Retirement

If you want a long and fulfilling retirement, you need more than money. Here are the most valuable retirement assets to have (besides money), and how …
August 3, 2020

Recommended

8 Things You Must Know About Retiring to the Carolinas
retirement

8 Things You Must Know About Retiring to the Carolinas

From the mountains to the beaches, North Carolina and South Carolina offer retirees plenty of incentives.
August 14, 2020
An Advocate for End-of-Life Care
Caregiving

An Advocate for End-of-Life Care

Without a health care proxy, your written instructions for future medical care may not be carried out if you become incapacitated.
August 14, 2020
Get the Most from a Zoom Meeting with Your Financial Adviser
retirement planning

Get the Most from a Zoom Meeting with Your Financial Adviser

Done right, virtual financial planning meetings can be just as productive (or even more so!) than in-person ones.
August 11, 2020
Drawing Down Retirement Savings in a Pandemic
Coronavirus and Your Money

Drawing Down Retirement Savings in a Pandemic

Tapping the right accounts at the right time matters. Knowing how much a retiree can spend each year without running out of savings in old age is even…
August 7, 2020