Launched on Dec. 27, 1989, the Fidelity Low-Priced Stock Fund ("FLPSX") has become one of the company's largest and best-performing mutual funds. The fund was originally established as a way to invest primarily in small company value stocks. As the assets have grown over time, the universe of investment possibilities has grown. Stock prices have continued to go up as the stock market has risen. The fund originally targeted stocks with prices of $25 and under but has since raised that limit to $35. The fund's assets have swelled to almost $40 billion. Fund managers only have so much opportunity in small company stocks when they have such a large asset base. The fund's managers have had to move into mid-cap stocks to put money to work effectively.

Earning an overall four-star rating from Morningstar, the Low-Priced Stock Fund remains one of Fidelity's more popular investment choices.

Company Overview

Fidelity Investments has been around since 1946 and ranks as the fifth-largest mutual fund company as of Sept. 30, 2015. Fidelity began as a company that oversees individual separately managed accounts and has since expanded into brokerage accounts, workplace retirement plans such as the 401(k) and investment advisory services. As of Sept. 30, 2015, the company now manages over $2 trillion in investor assets.

Fund Management Team

Joel Tillinghast managed the Low-Priced Stock Fund by himself from the fund's inception up until Sept. 6, 2011, when six co-managers were added. While many managers at Fidelity bounce around to different funds or manage multiple funds, Tillinghast has stayed relatively focused. Outside of the Low-Priced StockFund , Tillinghast only manages the Fidelity Series Intrinsic Opportunities Fund ("FDMLX"), a fund with a similar management style to the Low-Priced Stock Fund but without the share price restriction.

Fund Overview

The Low-Priced Stock Fund has one of the more unique investment objectives in the mutual fund industry. Share prices on stocks are essentially arbitrary, so focusing on stocks with prices under $35 shouldn't, in theory, eliminate any particular sector or company size. Low share prices, in general, tend to lead to smaller companies, which the fund's managers aim to focus on.

The Fidelity Low-Priced Stock Fund seeks to deliver long-term capital growth by investing primarily in smaller companies that the managers believe are undervalued relative to their intrinsic values. Investments in small companies tend to be riskier, and this fund carries above-average overall risk compared to large-cap mutual funds. The fund is benchmarked to the Russell 2000 Small Cap Index.

The fund has been closed to new investors at various points in the past. As of March 4, 2016, the fund is open to new investors and requires a $2,500 minimum initial investment to open an account. The Fidelity Low-Priced Stock Fund has a total expense ratio of 0.79% as of Sept. 29, 2015.

Investment Philosophy

The fund focuses primarily on small- and mid-cap stocks that meet the fund managers' value criteria. These criteria typically include low price/earnings (P/E) multiples, industry leadership, solid cash flow and strong balance sheets. The fund can invest in any sector and can invest overseas. It can also invest in large-cap stock or growth names if they meet the appropriate criteria.

Portfolio Composition

The Low-Priced Stock Fund has a far greater number of holdings than the typical mutual fund. As of Dec. 31, 2015, the fund maintains 879 different holdings in its portfolio, with the top 10 accounting for roughly 25% of the fund's total assets. Tillinghast has said that approximately 200 of these positions are very small. Top holdings include UnitedHealth Group, Inc. (NYSE: UNH), Next PLC (OTC: NXGPY), Seagate Technology PLC (NASDAQ: STX), Ross Stores Inc. (NASDAQ: ROST) and Best Buy Company, Inc. (NYSE: BBY).

As of Jan. 31, 2016, the fund is overweight in the consumer discretionary sector with its 27% allocation nearly doubling that of the Russell 2000's 14% allocation to the same sector. Outside of consumer discretionary, the fund has significant weightings in technology, with 17% of total assets, and health care, with 12%.

 

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