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Ways to win in a bull market

In a bull market (the current has reached its eighth birthday in March), mutual fund managers can find many ways to win. In the second quarter, three of the top performing equity funds scored with such diverse choices as known technology companies, micro-capitalization stocks and Asian innovators.

Fidelity OTC Portfolio
Gavin S. Baker, head of the Fidelity OTC portfolio, often makes big bets on big names. Its fund, for example, had committed about 8.5 percent of its $ 15.3 billion assets to Tesla, an electric car manufacturer, at the end of May. It also had important slugs from Apple, Alphabet and Amazon.

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This is partly due to the fund’s design and is compared to the Nasdaq Tech Heavy Composite Index. Thus, to favor a business, as Mr. Baker did with Tesla, his fund must have a larger allocation to the stock than the index. Tesla represents less than 1 percent of the Nasdaq.

Mr. Baker aims to identify and exploit sustainable technology themes such as the continued growth of e-commerce and cloud computing. Recently, a favorite motif is the emergence of artificial intelligence. “A.I. Will change the world in a way we can not even imagine now,” he said.

Tesla’s participation in the fund is partly a bet on this belief. Mr. Baker, a Tesla owner himself, said he loves the company not only for the quality of his cars but also for his continuous improvements to his own driving technology. Many other companies are developing this technology too, but Mr. Baker is optimistic about Tesla’s prospects.

“In a year or two we can look back and think it’s fun, we focused on Tesla being an electric car company when they build a big competitive edge in autonomous driving,” he said.

Tesla’s stock has fallen recently, down more than 15% from the June 23 summit. Mr. Baker said his fund added his Tesla position this year, although he does not comment on whether the fund had bought or sold stocks recently.

Mr. Baker has been managing his fund since 2009. During this period, he said, he learned patiently: “I am increasingly appreciative that in a world dominated by people selling ETFs and traders And Quantitative hedge funds, the biggest competitive advantage that I have a long-term time horizon. “Mr. Baker maintains an average life of about two years and will keep stocks favored much longer.Nvidia, for example, Was an overweight in the fund – a larger allocation than the benchmark – for Mr. Baker’s mandate.

The fund, with an expense ratio of 0.91 per cent, returned 9.34 per cent in the second quarter compared to a total return of 3.09 per cent, including dividends, for the index Of 500 shares of Standard & Poor’s.

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