Investor Alert

New York Markets Close in:

Peter Brimelow

Peter Brimelow Archives | Email alerts

Dec. 22, 2009, 1:43 a.m. EST

Mutual fund letter says buy-and-hold not dead

Commentary: Jim Lowell beats the pack in spite of economic uncertainty

Watchlist Relevance

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    Fidelity Select Communication Services Portfolio (FBMPX)
  • X
    Fidelity Select Air Transportation Portfolio (FSAIX)
  • X
    Fidelity Real Estate Investment Portfolio (FRESX)

or Cancel Already have a watchlist? Log In

By Peter Brimelow, MarketWatch

NEW YORK (MarketWatch) -- The top-performing mutual fund letter is cautiously optimistic and says "buy and hold" is not dead.

Actually, Jim Lowell's Fidelity Sector Investor -- up 52.14% by Hulbert Financial Digest count over the past 12 months, compared to 27.10% for the dividend-reinvested Wilshire 5000 Total Stock Market Index -- isn't exactly the top mutual fund letter. That distinction goes to Closed-End Country Fund Report, up 81.7%. But for internal reasons, Closed-End Country Fund Report has not published since 2004.

Moral: It really helps to be right on the major trend. Or at least lucky. (See July 13 column.)

Fidelity Sector Investor, in contrast, trades actively and successfully. The letter was hit by the Crash of 2008, but over the past three years is still up an annualized 1.23% versus an annualized 5.73% loss for the total return Wilshire 5000. Over the past five years, the letter was an annualized 5.25%, against just 1.11% annualized for the total return Wilshire 5000.

Since HFD began following Fidelity Sector Investor in 1999, the letter is up an annualized 3.5%, versus negative 1.1% annualized for the total return Wilshire 5000.

(Lowell also publishes Fidelity Investor, up 31.3% over the last 12 months, and ETF Trader, up 27.6%. In addition, his ETF Trader letter is published by MarketWatch, the publisher of this report.)

Fidelity Sector Investor has a disciplined system, featuring monthly trading and a proprietary technical indicator which it uses to rotate its portfolio holdings, split seven ways between funds managed by the Fidelity management company.

Beyond emitting recommendations, editor Lowell says relatively little, but the letter is incisive. He has noted that "slow recovery remains distinct from no recovery" and said recently: "I think the trend remains in place for recovery at best and, at worse, an ongoing process of stabilization."

This doesn't mean that Lowell is necessarily optimistic longer-term. He wrote recently: "Here and now, there are fat-cat bankers that may number a handful and make for great polemical fodder, but I don't see anyone in DC giving up their limos, let alone their proprietary helping of publicly funded health-care and pension plans that are second to none. Moreover, the real fast money (in terms of solid salaries, job creation, and pay increases) is on the government doles. The trouble is, we pay those salaries -- and if government is going to continue to expand, taxes will have to go demonstrably higher to support its payroll -- perhaps at the expense of economic recovery. I'll be watching!"

Discussing his cautious view of the longer term, Lowell provided a terse summary of his investing philosophy: "What we have is what we said we'd get: a classic cycle from peak to trough to recovery. That doesn't mean we aren't ahead of ourselves. That doesn't mean a disruption could linger and malinger the recovery trend. That doesn't mean next year will be easier; in fact, I think it will be harder."

"But it also doesn't mean that ducking out of the market and trying to figure out the time to jump back in has been a successful strategy," he wrote. "Instead, at about the time that all of the 'death of buy-and-hold' articles appeared, that strategy began to work better than ever before."

"We knew it would -- and we're looking forward to the self-same pundits writing about the 'death of the death of buy-and-hold arguments.' Stay tuned."

Among funds rated "buy" in Fidelity Sector Investor's issue published last week:

Fidelity Select Multimedia /zigman2/quotes/203603051/realtime FBMPX +0.03%

Fidelity Select Air Transportation /zigman2/quotes/203389936/realtime FSAIX +0.58%

Fidelity Real Estate Investment /zigman2/quotes/202378219/realtime FRESX +0.49%

Fidelity Select Medical Delivery /zigman2/quotes/209924454/realtime FSHCX +1.42%

Fidelity Select IT Services /zigman2/quotes/207417827/realtime FBSOX +0.63%

Fidelity Select Natural Gas /zigman2/quotes/201887980/realtime FSNGX -4.26%

Fidelity Pacific Basin /zigman2/quotes/206531353/realtime FPBFX +1.26%

US : U.S.: Nasdaq
$ 65.85
+0.02 +0.03%
Volume: 0.00
May 20, 2022
US : U.S.: Nasdaq
$ 57.59
+0.33 +0.58%
Volume: 0.00
Nov. 12, 2021
US : U.S.: Nasdaq
$ 45.40
+0.22 +0.49%
Volume: 0.00
May 20, 2022
US : U.S.: Nasdaq
$ 125.71
+1.76 +1.42%
Volume: 0.00
May 20, 2022
US : U.S.: Nasdaq
$ 52.61
+0.33 +0.63%
Volume: 0.00
May 20, 2022
US : U.S.: Nasdaq
$ 15.52
-0.69 -4.26%
Volume: 0.00
Nov. 19, 2021
US : U.S.: Nasdaq
$ 30.62
+0.38 +1.26%
Volume: 0.00
May 20, 2022

This Story has 0 Comments
Be the first to comment
More News In

Story Conversation

Commenting FAQs »

Partner Center

Link to MarketWatch's Slice.