"Of Mutual Interest"-Dan Wiener of Vanguard & Jim Lowell of "Fidelity Investor"
Tuesday, March 11, 2008PAUL KANGAS: In tonight "Of Mutual Interest segment, a look at what is going on at two of the nation's largest mutual fund families, Vanguard and Fidelity. Joining us for that discussion, two men who follow those firms as outside observers, Dan Wiener, editor of the independent advisor for Vanguard investors and Jim Lowell, editor of a similar newsletter called "Fidelity Investor." Dan and Jim, welcome back to NIGHTLY BUSINESS REPORT.
DAN WIENER, EDITOR, INDEPENDENT ADVISER FOR VANGUARD INVESTORS: Thank you.
JIM LOWELL, EDITOR, FIDELITY INVESTOR: Good to be here.
KANGAS: Dan, when people think of Vanguard, they generally think of index funds like the Vanguard 500 which moves in lock step with stocks in the Standard & Poor's 500 Index. But I know that you have long favored some of Vanguard's managed funds. Have those faired better in this bear market?
WIENER: They sure have. Particularly the health care fund which is a great buffer and the portfolio is down, a lot of their managed funds are doing better.
KANGAS: OK, Jim, unlike Vanguard, Fidelity's reputation has been built on the skill of its individual managers. Have your favorite Fidelity managers been able to beat the market lately?
LOWELL: They absolutely have. They trounced it last year, some getting three to four times of the returns of their market benchmarks. This year they are doing what we pay active managers to do, namely loose less when the market is in a downdraft.
KANGAS: Jim, a few months ago Fidelity was heavily promoting the reopening of its former flagship fund Fidelity Magellan which has been closed to new investors for several years. How did the timing of that move turn out?
LOWELL: It turned out fairly well for new investors. We have been calling it for it to be reopened ever since the new manager Harry Lang took the helm back in October of 2005. Since then he has been able to dramatically outperform the S&P 500 for the first time in the last decade of Magellan's return performance history and lately he is been doing what I expect him to do. He's a global growth, go anywhere stock picker; he's delivering the goods.
KANGAS: There has just been a changing of the guard at the top of Vanguard, as long time CEO John Brennan has been replaced by William McNabb. Dan, do you expect that to lead to any big changes in the company?
WIENER: I don't expect big changes. I think that McNabb is going to continue on the path that Brennan set. Brennan more than quadrupled assets under management and he was behind the big move into exchange-traded funds which has been very successful.
KANGAS: Now Jim, what about at Fidelity? There have been some major changes in the executive ranks there as well.
LOWELL: No question, June of last year, July of last year, we saw the return to the fold of Roger Lawson. He was instrumental in Fidelity's heyday of basically broadcasting to the world that he wrote the book on growth fund investing and selling to the product, rather than to the platform. Since he has taken over, we have seen significant management as well as manager changes, all for the good as far as I'm concerned.
KANGAS: OK. Now Dan and Jim, we should note that your work also involves money management. So Dan, what Vanguard funds do you like right now?
WIENER: Well, I'm a big believer in the health care fund at Vanguard. I also think that the managers at Prime Cap Corp., which is a terrific prime cap management fund is one that you want to invest in. And obviously I still think you ought to put your money in emerging markets. They've come down a bit. All have outperformed.
KANGAS: OK, now Jim over at Fidelity, what funds do you like there?
LOWELL: I pick four, equal measures for growth fund investor, mega-cap stock, leveraged company stock, international small cap opportunities and strategic real return. Those four funds I think will net you twice the return of the S&P 500 over the next 10 years.
KANGAS: OK. Dan and Jim, do you own any of the funds you are recommending or have other disclosure to make?
WIENER: We absolutely own all of them. In fact most of our net worth is invested in these funds.
KANGAS: And.
LOWELL: I would echo that sentiment.
KANGAS: That good. That is a vote of confidence from both of you.
WIENER?: Eat our own cooking.
KANGAS: There you go. Dan and Jim, as always it is great to have both of you here and we look forward to seeing you again.
WIENER?: Thank you Paul.
KANGAS: My guest, Dan Wiener of the independent advisor for Vanguard Investors and Jim Lowell of "Fidelity Investor."
Dan & Jim's Picks
Dan's Picks:
Vanguard Health Care (VGHCX)
[Substitute: Hartford Global Health (HGHAX)]
Vanguard PRIMECAP Core (VPCCX)
Vanguard Emerging Markets ETF (VWO)
Jim's Picks (Fidelity):
Mega Cap Stock (FGRTX)
Leveraged Company Stock (FLVCX)
Int'l Small Cap Opportunity (FSCOX)
Bond Fund: Strategic Real Return (FSRRX)
