With only two weeks left in 1993, Fidelity Investments is clearly the top mutual fund family of the year.
"They've had a heck of a year," said Don Phillips, publisher of Morningstar, the mutual fund rating service. "Their equity funds have really been on the mark."Almost all Fidelity's stock funds have chalked up gains of 15 percent or more, with most of them clobbering the benchmark Standard & Poor's 500 Index by more than 10 percent.
The nation's largest fund company, Fidelity (tel. 1-800-544-8888) has more than 150 funds and $250 billion under management.
Its flagship fund, Fidelity Magellan, which many investment experts said was too big when it grew to $10 billion in assets, swelled to $30 billion this year. Magellan manager Jeff Vinik is whipping the S&P 500 by about 20 percent.
Fidelity has made its money this year by placing some huge bets that turned out to be right on the money. That kind of success won't happen every year, Phillips cautions.
Fidelity fund managers wagered that brand name consumer stocks had run out of steam and sold them heavily. They bought technology and energy stocks.
"When we see a trend we jump on it," said Fidelity's Tracey Gordon.
The company poured money into foreign stocks. About 20 percent of the assets of many Fidelity domestic stock funds are invested overseas.
While Fidelity has long been known for stellar domestic stock funds, the company has been upgrading its overseas research. That investment has paid off this year, with Fidelity international funds running comfortably ahead of foreign stock market indexes.
"Fidelity doesn't stay weak in any area, because they invest in the best computers and the best research and they hire the best people," Phillips said.
Almost all the company's profits are reinvested in the firm, he said.
Ironically, that's possible only because Fidelity is a privately held company. If Fidelity were a publicly traded firm, as are virtually all the companies it invests in, more profits would have to be distributed to shareholders.
When investing in Fidelity funds, one has to temporarily set aside many of the lessons one has learned as an investor.
Experienced investors know to stick to low-turnover funds, to be skeptical of new funds and to buy funds only when managers stay put for a long time.
At Fidelity, most funds have high turnover, new funds tend to outperform older ones and fund managers are frequently reshuffled.
Fidelity Asset Manager is perhaps the best asset allocation fund, Phillips said. If you want a fund to make all your investment decisions for you, this is a good choice.
Eric Kobren, editor of Fidelity Insight, a valuable, independent newsletter for Fidelity investors, currently recommends Small Cap Stock, Equity Income II, Balanced, and International Growth and Income.
Be forewarned that many Fidelity managers are nervous about the market's prospects next year. Most are betting on continued weakness in consumer stocks, and strength among autos, steels, some commodities and metals, and technology stocks.
In addition to paying good money, Fidelity offers fund managers independence that attracts many of the best in the business, said Steve Janachowski, a San Francisco money manager.
Managers who work grueling hours and do well are quickly promoted; others don't last long.
"I wouldn't want to work at Fidelity," Janachowski said. "But their funds are good for our clients."
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(Additional information)
Stock funds' performance
Average yearly performance of Fidelity's domestic stock funds compared to the S&P 500 (with dividends reinvested)
Year Fidelity funds S&P 500
1993 (thru 12/10) +21.09 +9.37
1992 +13.44 +7.62
1991 +39.58 +30.48
1990 -5.34 -3.12
Sources: Morningstar, Inc.; Standard & Poor's Corp.