Fidelity to Reopen Contrafund and Low–Priced Stock Fund

Nowadays, you can buy lot of quality stocks such as GE (GE), Alcoa (AA), Microsoft (MSFT), or eBay (EBAY) at very low price after relentless selling on the Wall Street all year long, if you have the stomach for short term volatility. For these stocks, you will have to go back 10 or even 20 years to find prices at which you can buy them now.

When stocks suffer, so do mutual funds that hold them. And for mutual funds that have been closed for some time due to repaid inflow of money when they were hot, one way to cope with loss of capital after investors withdraw their money because of poor performance recently is to reopen the funds to new investors. We have already seen good mutual funds from Vangard, Oakmark, and Dodge & Cox reopened their doors. Now Fidelity also put two of its largest funds, Fidelity Contrafund (FCNTX) and Fidelity Low-Priced Stock Fund (FLPSX), back on the market, starting December 16th, after reopening its Magellan Fund early this year. FCNTX has been closed since 2006 and FLPSX since 2003. Both have suffered significant losses in net assets.

Fidelity Contrafund

Contrafund (FCNTX) is categorized as large-cap growth fund by Morningstar. It currently has a total net assets of $47 billion, down nearly 42% so  far in 2008. The fund has a 0.89% expense ratio (ER) and a yield of 0.89%. FCNTX has more than 91% of its assets invested in domestic stocks with Berkshire Hathaway A as its largest holding and Google, Apple, and P&G among the top 5. From 2003 to 2007, FCNTX returned double-digit annually every year with an average annual return of 18.12%. In 2007, the fund manager of FCNTX, William Danoff who has been managing the fund since 1990, won the Domestic Equity Fund Manager of The Year reward from Morningstar.

Low-Price Stock Fund (FLPSX), on the other hand, primarily invests in small to mid-size companies both domestically and around the world. FLPSX, which my wife owns in her 401(k) account, has a 0.96% ER and 0.93% yield. The fund had a good run from 2003 to 2006, but saw its NAV dropped more than 40% YTD and that puts its 5-year average return into negative territory. As of July 31, 2008, FLPSX invests 88.7% its assets in stocks and 9.9% in cash. Brazilian Petroleum Corp ADR is its largest holding, followed by UnitedHealth and Bed, Bath & Beyond.

If you want to invest in either of these two funds, you will need a minimum of $2,500 to open an account.

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7 Responses to “Fidelity to Reopen Contrafund and Low–Priced Stock Fund”

  1. Tim |  Dec 04, 2008 at 5:45 am

    yeah, after being hammered buying into D&C stock fund when it reopened, i guess i will wait a little before going into the contrafund. not too long though now that it has been sold heavily, unlike when i started buying d&c stock fund. their current top 5 holdings i think are good, so long as they don’t try to rebalance by purchasing more financials or health care.

  2. Manshu |  Dec 04, 2008 at 3:06 pm

    I have always been more interested in buying stocks directly than mutual funds. In the current market, I see a lot of good buys and am slowly accumulating those.
    I buy funds only when I can’t directly buy the asset that it tracks. For example currency ETFs or Oil ETFs.

  3. Sun |  Dec 04, 2008 at 3:35 pm

    Tim: I have been buying regularly DODGX since day one and just added DODFX to my monthly purchase list. Both funds have done poorly lately, but I hope that’s just temporary. Since I plan to hold both funds for long time, maybe they can recover down the road.

    Manshu: I own a lot of individual stocks and have been hit pretty hard :(