A portfolio without foreign stocks would be like "fighting an investment battle with one arm tied behind your back," says Jed Weiss. He's biased, of course, as manager of Fidelity International Growth (FIGFX) fund. But he has a point: Foreign stocks make up about half of the global stock market.
Over the past 12 months, International Growth, a member of the Kiplinger 25, gained 28.7%, trailing the 30.9% return of the MSCI EAFE Index, which tracks foreign stocks in developed countries. The fund shone for most of the year, but November and December were a challenge.
That's not surprising: The fund tends to thrive during stretches of market uncertainty, thanks to Weiss's penchant for what he calls share gainers – financially healthy companies with strong positions in their industry that can raise or keep prices steady even in troubled times. Semiconductor companies such as ASML Holding (ASML), Lam Research (LRCX), Lasertec (LSRCY) and Taiwan Semiconductor Manufacturing (TSM) were among the fund's big winners over the past year.
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But when the stock market makes a sharp upward turn, the fund typically lags. That's what happened in late 2020. The approval of two COVID-19 vaccines fueled a shift in market sentiment away from steady Eddies. As a result, some fund holdings that had done well earlier in the year suddenly became laggards, including Roche (RHHBY) and Nestlé (NSRGY), defensive businesses with strong balance sheets.
A Tilt Toward Survivors
Life is returning to normal now, and that bodes well for International Growth.
"The market has started to focus on firms that will come through this period stronger, and that's what my investment process is geared toward," says Weiss.
He's upbeat about luxury companies that have gained market share. "Not all did well," says Weiss. LVMH Moët Hennessy Louis Vuitton (LVMUY) is a top holding. Weiss sees opportunities, too, in hard-hit industries such as aerospace and commercial catering. Earlier this year, he picked up shares in the U.K. catering company Compass Group (CMPGY).
Weiss's focus on market-share gainers has served investors well. The fund's five-year annualized return, 14.3%, beat the 10.6% annual return of the MSCI EAFE Index.
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