Fidelity Balanced, inept for years, makes strides

Fund profile

Dollars & Sense

October 24, 1999|By MORNINGSTAR

Unlike many of its peers, Fidelity Balanced Fund is more about asset-picking than asset allocation.

While many fund managers try, few make consistently accurate asset-allocation moves. For several years in the mid-1990s, this fund was one of the most inept market-timers. It was overweighted in bonds when interest rates climbed in 1994 and again in 1995 as the equity market soared.

While the fund added moderately to its stocks in 1996, it lagged anyway because of scant large-cap exposure.

But the fund's performance has vastly improved since it adopted a standard 60 percent stocks and 40 percent bonds mix in 1997. Current lead manager Stephen DuFour has occasionally taken the fund's equity weighting a little higher than 60 percent with good results -- in 1998's fourth quarter, for example.

DuFour has focused most of his energy on stock-picking, though, and his buys -- such as Unisys and Time Warner -- have generally been on target. His sector weightings, which rarely match those of the Standard & Poor's 500 index, have also been a boon.

DuFour typically overweights financials, but reduced this stake before 1998's third-quarter correction because of high valuations. He then built it up again before the sector bounced back in the fourth quarter. Large positions in telecommunications and media stocks have also served the fund well in the past few years.

Kevin Grant's fixed-income portfolio nicely complements DuFour's strategy. Grant concentrates on high-quality corporate and government paper, but is always on the lookout for underappreciated issues. During last year's global credit crisis, he bought higher-yielding, lower-quality corporate bonds on the cheap, and they have rewarded him with standout performance in 1999.

Though its past is lamentable, this fund's excellent showings in recent years and now-consistent asset weightings make it an attractive option.

Fidelity Balanced

Fund managers: Stephen DuFour and Kevin Grant

Largest investment sector: Services Style: The fund's median equity investment is in value stocks of companies with large market capitalizations.

Total returns as of 10/15/99

Year-to-date: 1.05%

One-year: 13.22%

Three-year annualized: 16.37%

Five-year annualized: 12.89%

Risk vs. domestic equity funds: Low

Morningstar rating: 4 stars

Maximum sales charge: No-load

Phone number: 800-544-8888

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