Home Latest Commentary chevron_right Adviser Fund Update One of Fidelity’s Best Managers Taking Leave July 22, 2011 Top Fidelity Manager Is Going Walkabout Earlier this month, before Fidelity publicly broke the news, we learned that Joel Tillinghast, the renowned manager of Fidelity Low-Priced StockA financial instrument giving the holder a proportion of the ownership and earnings of a company., would be departing on a four-month leave of absence this September. A standout among Fidelity’s managers, Tillinghast has been tireless in his pursuit and delivery of managerial excellence on behalf of his shareholders. He’s the real deal: A manager who measures his own worth not by the size of his bank account but by his shareholders’ returns. After nearly 22 years managing the fund, we really cannot begrudge Tillinghast’s decision to take some time off (although the news initially did give us some concern). According to Fidelity, Tillinghast plans to travel to Asia, continue his work writing a personal finance book for retail investors, and spend time mentoring some of Fidelity’s analysts and first-year portfolio managers. We wish Tillinghast the best–his fund has long been a component of many client portfolios–and hope he returns from his walkabout refreshed and recharged. Meanwhile, his impending departure raises several questions for shareholders like us. Unlike individual investors in the fund, however, our unique access to Fidelity allowed us to speak directly to Tillinghast and his colleagues to get answers to those questions and begin to make contingency plans should the need arise. Who will mind the shop during Tillinghast’s absence? Jamie Harmon, a 16-year Fidelity veteran, was handpicked by Tillinghast to oversee the fund. He’ll be leading a team of five sector managers who will contribute ideas for the fund’s portfolio. This team includes: • Shadman Riaz: Materials, Energy and Utilities • Kathy Buck: Consumer Staples and Consumer Discretionary • Rayna Lesser: Telecom Services and Information Technology • Justin Bennett: Financials • John Mirshekari: Industrials “Team Joel” has been working alongside Tillinghast since mid-March (and will continue to do so until his departure), which should give the team plenty of time to learn the ropes. But even as Tillinghast globetrots, ruminates and educates, investors can be reassured that he will retain oversight of the fund. No major changes to sector weightings or international exposure will be made without his approval, and no changes to his top 50 holdings will be made without his say so. What experience does Harmon bring to the table? Harmon earned a B.A. from Harvard University in 1994 and joined Fidelity’s equityThe amount of money that would be returned to shareholders if a company’s assets were sold off and all its debt repaid. research department in 1995, focusing on energy and health care services stocksA financial instrument giving the holder a proportion of the ownership and earnings of a company.. Since 1998, he has worked exclusively in the small-cap stockA financial instrument giving the holder a proportion of the ownership and earnings of a company. arena. He’s managed Advisor Small Cap since October 2005, and has previously managed: • Small Cap Growth (April 2005 to October 2005) • Stock Selector Small Cap (April 2001 to October 2005) • Small Cap Discovery (September 2000 to October 2005) • Select Biotechnology (June 1997 to May 1998) How does Harmon’s track record stack up against Tillinghast’s? Because Harmon has not run any retail Fidelity funds since 2005, he has not been part of Chief Investment Officer Jim Lowell’s regular retail fund manager rankings since then. However, after taking a closer look at his track record at Advisor Small Cap, we were pleasantly surprised to learn that had Harmon been included, he would have ranked higher than both Tillinghast and Will Danoff, the successful manager of Contrafund. (Through June 30, 2011, Tillinghast and Danoff ranked 10th and 11th, respectively, out of 27 managers in the “growth and growth & income” category.) Take a look at the table below, where Tillinghast and Harmon’s performances on Low-Priced Stock and Advisor Small Cap over various periods are laid out side by side. Since Harmon took over the management of Advisor Small Cap at the end of October 2005 through the beginning of this month, his fund outperformed Low-Priced Stock by 2.1%, cumulatively. While past performance is not a good predictor of future results, Harmon’s record next to Tillinghast’s is impressive, and bodes well for the fund during Tillinghast’s leave. Harmon’s style, philosophy, and discipline are highly correlated to Tillinghast’s approach. As of each fund’s most recent holdings report, Harmon’s three largest sector allocations include information technology (28%), health care (21%) and industrials (18%). Tillinghast also favors information technology (16%) and health care (13%), but his top sector remains consumer discretionary (26%). Is there a chance Tillinghast won’t return to the helm of Low-Priced Stock? Fidelity says Tillinghast will begin his leave on September 6 and will return in January 2012. We were curious to know if the sabbatical is a trial separation, illness-related, or simply a walkabout quest. After speaking directly with Tillinghast, Brian Hogan, who oversees Fidelity’s equity funds, as well as Harmon, we’re confident that Tillinghast will return as scheduled. Should investors consider exchanging out of Low-Priced Stock? Based on Harmon’s strong results and our confidence that Tillinghast will be back, we believe shareholders should stay put. We will be closely watching the performance of Low-Priced Stock during the interim period for any signs of unexpected divergence from Tillinghast’s past performance behavior. But, with Harmon’s own past performance reflecting a very similar style and outcome, we think it makes fundamental sense to stay the course with Low-Priced Stock. About Adviser Investments Adviser Investments operates as an independent, professional wealth management firm with expertise in Fidelity and Vanguard funds, actively managed mutual funds, ETFsA type of security which allows investors to indirectly invest in an underlying basket of financial instruments (these may include stocks, bonds, commodities or other types of instruments). Shares in an ETF are publicly traded on an exchange, and the price of an ETF’s shares will fluctuate throughout the trading day (traditional mutual funds trade only once a day). For example, one popular ETF tracks the companies in the S&P 500, so buying a share of the ETF gets an investor exposure to all 500 companies in the index., fixed-income investing, tactical strategies and financial planning. Our investment professionals focus on helping individual investors, trustsA legal document that functions as an instruction manual to how you want your money managed and spent in your later years as well as how your assets should be distributed after your death. Assets placed in a trust are generally safe from creditors and can be sold by the trustee in short order, avoiding the lengthy and costly probate process., foundations and institutions meet their investment goals. Our minimum account size is $350,000. For the fifth consecutive year, Adviser Investments was named to Barron’s list of the top 100 independent financial advisers nationwide and its list of the top advisory firms in Massachusetts in 2017. We have also been recognized on the Financial Times 300 Top Registered Investment Advisers list in 2014, 2015 and 2016. For more information, please visit www.adviserinvestments.com or call 800-492-6868. Disclaimer: This material is distributed for informational purposes only. The investment ideas and expressions of opinion may contain certain forward-looking statements and should not be viewed as recommendations, personal investment advice or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed. Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, riskThe probability that an investment will decline in value in the short term, along with the magnitude of that decline. Stocks are often considered riskier than bonds because they have a higher probability of losing money, and they tend to lose more than bonds when they do decline. factors, strategies, affiliations, services offered and fees charged. Past performance is not an indication of future returns. The tax information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. We do not provide legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation. The Barron’s rankings consider factors such as assets under management, revenue produced for the firm, regulatory record, quality of practice and philanthropic work. This award does not consider client experience and is not indicative of future performance. Editors at the Financial Times bestowed “elite” status on 300 firms in the U.S., as determined by assets under management, asset growth, longevity, compliance record, industry certifications and online accessibility. © 2018 Adviser Investments, LLC. All Rights Reserved.