Eric Kobren: The Leading Independent Fidelity
Expert
Eric Kobren has more than 25 years experience
in the investment field. After receiving his MBA from Columbia University
in 1976, Mr. Kobren worked in professional staff positions with
Merrill Lynch and E.F. Hutton in New York. In 1982, Mr. Kobren joined
Delphi Management, a highly-regarded institutional money management
firm in Boston, as Vice President of Research and Trading. In 1983,
Mr. Kobren was named Group Marketing Director at Fidelity Investments.
In 1985, Eric Kobren founded the independent
financial newsletter "Fidelity Insight." Since then, Kobren's
team has grown to 45 financial and analytical professionals, and
a private money management group handling over $750 million in assets
from its office in Wellesley Hills, MA.
Today, Eric Kobren is widely recognized as the
nation's leading independent expert on Fidelity, and one of the
preeminent analysts of the overall mutual fund industry. He has been
widely quoted in The Wall Street Journal, The Boston Globe, The
New York Times, and USA Today, and has been a frequent participant
in Barron's annual Mutual Fund Roundtable.
Better Results From A
Sophisticated Process
The key to the success
of Fidelity Insight's portfolios is an intensive and disciplined research process. We begin at the macro level, evaluating the economic
and market environment looking out 6-18 months. We continue the
process down to the micro level, evaluating the qualities and skills
of individual mutual fund managers. Though the actual process is
quite involved, it can be summarized as three steps.
Step
1: Determining the Right Asset Mix for the Current Market
Our investment process begins with a fundamental investment analysis
of the economy and the investment markets in the United States and
in foreign countries. Major factors include:
- Economic factors such
as inflation, employment and interest rates
- The outlook for corporate
earnings
- Current stock valuations
(price to earnings, price to book, etc.)
- Supply and demand for
various asset classes
Given our view of the overall
investment environment, we determine for each of our Fidelity portfolios
the percentage that should be invested in U.S. stocks, foreign stocks,
U.S. bonds, and money markets or other cash equivalents.
While all of our portfolios
are actively managed, we don't normally shift significant amounts
of a portfolio from equity funds to money market funds over a short-term
period. However, we may invest in money markets or short-term debt
instruments as a defensive measure even in our more aggressive portfolios.
Step
2: Choosing the Best Mix of Investment Styles
Once our asset allocation decisions are made, the next step in the
process is to determine the percentage allocated to each of the
following seven global equity styles:
- U.S. Growth - Large
Capitalization
- U.S. Growth - Small
Capitalization
- U.S. Value - Large Capitalization
- U.S. Value - Small Capitalization
- Diversified International
Equity
- Specialized International
Equity
- U.S. Real Estate Investment
Trusts
We first review the broad-based
economic factors that will influence the earnings prospects for
each style. The resulting earnings outlook for each style is compared
to its current valuation, both relative to historical norms and
to other styles, to determine its overall attractiveness.
Step
3: Selecting the Best Mutual Funds for Each Style
The last step in our process is to select the Fidelity funds that
we believe offer the highest risk-adjusted return potential for
their investment style. We use an internally developed screening
process which includes a risk-adjusted performance analysis as well
as an evaluation of each fund relative to its peers. But this screening
process is just a preliminary refinement before a more in depth
quantitative and qualitative evaluation takes place.
Key factors we examine
include each Fidelity fund's:
- Asset Allocation
- Individual Holdings
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- Sector Weightings
- Risk Characteristics
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Another vitally important
factor in fund selection is the fund managers themselves. In our face-to-face
meetings, we look for Fidelity managers who display what we consider
are five critical characteristics of success:
- A passion for investing
- A well-defined investment
discipline
- Superior knowledge of
their holdings
- Strong conviction of
their investment ideas
- A substantial amount
of their own money invested in the fund
A
Unique Advantage
This combination of sophisticated quantitative research and in-depth
one-on-one manager interviews gives us a unique advantage in building
and continuously managing Fidelity Insight's portfolios. 
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