The Fund Performance to the Morningstar - Essay Example

Fidelity Large Cap Stock Fund (FLCSX) Investment Analysis Assess the year-to performance of the FLCSX fund, including the key drivers of the fund performance, and how the performance of the fund compares to the S&P 500. The performance of the funds of Fidelity Large Cap Stock (FLCSX) is more progressive than S&P 500 (FLCSX Fidelity Large Cap Stock, 2013a). The drivers of the fund for FLCSX include financials and information technology, which have 20.13% and 19.73% portfolio weights, respectively. Further, S&P 500’s major drivers of fund also comprise of information technology and financials, but with a portfolio weight that is less than what FLCSX has accumulated; S&P 500 has gotten a 19.04% and 15.61%, respectively (Fidelity Large Cap Stock Fund, 2012). Based on the time frame, as close on January 24, 2013, FLCSX’s percentage change is deemed negative with -9% (FLCSX, 2013a), while S&P 500 accounts at a positive 36% (S&P 500 High Quality Portfolio, 2013). However, even if S&P 500 accumulated a positive shift, FLCSX has still gotten more NAV that accounted to 21.52 as of January 23, 2013 (FLCSX, 2013a), compared to S&P 500’s 16.58 (S&P 500 High Quality Portfolio, 2013). Furthermore, from 2003 to 2012, FLCSX’s hypothetical growth of $10,000 had been slackening in the years 2008 and 2011, with -47.46% and -1.62%, respectively. S&P 500’s hypothetical development had been incremental since it only got one year, 2008, of negative growth, with -37%. FLCSX has gotten 20.71% of total returns on its fun performance rate in the year 2012. Through analyzing the hypothetical development of $10,000 of both funds, FLCSX has gone all the way from 2003 to 2012 with a 10.54% hypothetical development as compared to S7P 500’s 10.34% growth. It can be deemed that FLCSX has won for this round. Generally, it is the domestic equities, having 91.80 percent of the total fund that drives the FLCSX fund to better performance (FLCSX, 2012). 2. Evaluate the volatility risks in the fund, providing an assessment of the fund manager’s performance based on the risk measurements for the fund. Make a recommendation to the fund manager for improving the performance. Provide a rationale for your recommendation. The risks associated to the FLCSX fund comprise of stock industries, in particular, the foreign markets that are flexible and inconsistent and generate detrimental rate as a response to opponent issuer, governmental, managerial, market, or economic improvements. Additionally, international holdings are subject to interest rate, currency exchange percentage, economic, and governmental risks. The volatility measures include beta 1.17, and if it measures more or less than 1.0, it signifies the irregularities of company returns and investments; therefore, fund managers should monitor that movement of returns in connection with the benchmarks to further sustain a non variation of beta measures. Moreover, R2 is a volatility measures that should be in the range of 0.00 to 1.00. If ever the measure exceeds by 1.00, there is a perfect correlation to the benchmark, and if lower than 1.00, funds are impacted by numerous elements. However, the measurement that is less than 0.5 indicates that Beta and Alpha do not equate a favorable performance. The fund’s manager should monitor the performance of the fund, and collate the data in order to stipulate techniques to make the measurement of R2 be perfectly 1.00. Furthermore, Shape Ratio also indicates the measurement of adjusted performance. The higher the ratio the fund has accumulated, the more the fund can survive the potential risk. Lastly, the Standard Deviation also signifies extreme consideration. The higher the latter is, the more the fund’s returns have been diffused; thus, it can result to greater risk. The use of this scheme is yearly, and it does not measure the performance of the fund, but rather it signifies the flexibility of the fund in the nature (FLCSX, 2012). The fund’s manager should, therefore, focus on the Beta and R2 volatility measures because such measures can further predict the incremental performance of FLCSX. 3. Compare your assessment of the fund performance to the Morningstar rating for the fund, indicating your agreement or disagreement with the rating. Provide support for your position. Every fund that has been in the industry for three years is being gauged using Morningstar Rating. This measurement is measured through the Morningstar Rating that is established on a Morning Risk-Adjusted Return appraisal that is diversely regarded in a fund’s monthly achievement. This may comprise the impacts of sales charges, loads and redemption payment. Moreover, the top 10 percent of the funds that are accounted in the investment denomination will receive five stars. Subsequent rating of 22.5 percent will receive four stars; the subsequent 35 percent will receive three stars; the subsequent 22.5 percent will receive two stars, and the bottom 10 percent will receive one star. For Morningstar, the overall rating of FLCSX is three stars. Out of 1, 506 funds, FLCSX has received three stars from Morningstar, which is the result of the loaded average of the performance figures accounted with its 3, 5, and 10 years Morningstar ratings. On its 3 year, FLCSX has received four stars, and three stars, on its 5 and 10 years, respectively (FLCSX, 2012). My personal evaluation dictates that FLCSX deserves a three stars rating from Morningstar because even if FLCSX has superseded the performance of S&P 500, it still has accumulated more favorable record as compared to the latter. However, S&P 500 has four stars (SPDR S&P 500 SPY, 2013) because the fund’s performance in the previous years has improved more in contrasts to FLCSX. Therefore, even if FLCSX has superseded the performance value of S&P 500 to date, S&P 500 has gotten more improvement than the former. 4. Assess the top 10 holdings in the fund, indicating the level of diversification in the fund. Identify a company that may impose increased risk and any changes that you would recommend in the funds composition to improve the fund performance. Provide support for your rationale. FLCSX has a number of 208 holdings as of December 31, 2012 (FLCSX, 2012). The fund’s top ten holdings accumulate 26.62 percent of the total holding rate. The top ten holdings include, in chronological order: (1) Apple Inc, (2) JPMorgan Chase & Co, (3) Wells Fargo & Con, (4) Chevron Cor, (5) General Electric Co, (6) Google Inc CIA, (7) Exxon Inc CIS Special, (8) Comcast Corp. CIA Special, (9) Procter & Gamble Co, and (10) Lowe’s Cos Inc (FLCSX, 2013c). Lowe’s Cos Inc had lost the race (FLCSX, 2012) when in the fall of 2012, Citigroup Inc replaced its rank in the top ten holdings (FLCSX, 2013b). Moreover, Apple Inc’s value, which is the greatest, accounts to 56,061,045, and the top ten, Lowes Cos Inc has a value of 22,372,371. Out of 208 holdings, Apple Inc’s share of 4.537 percent has been deemed as the greatest (Mutual Fund Comparison, 2012), followed by JPMorgan Chase & Co at 3.928 percent, 3.273 percent for Wells Fargo & Co, 2.724 percent for Chevron Corp, 2.429 percent at General Electric Co, Google Inc at 2.356 percent, 2.263 percent to Exxon Mobil Corp, Procter & Gamble Co with 2.049 percent, and Lowe’s Cos Inc with 1.811% (FLCSX, 2013b). In order for the FLCSX fund to improve its performance, it should include on its holdings a company that primarily concentrates on financial and technology because these two are the major drivers of the FLCSX fund (Mutual Fund Comparison, 2012). For finance, Citigroup Inc is the best holding that must be reinvigorated into the FLCSX fund. References Fidelity Large Cap Stock Fund [FLCSX]. (2012). Retrieved from https://fundresearch.fidelity.com/mutual-funds/performance-and-risk/315912402 FLCSX Fidelity Large Cap Stock [FLCSX]. (2013a). Retrieved from http://activequote.fidelity.com/webxpress/ popup_quote.phtml?SID_VALUE_ID=FCSX&time=8&freq=2&link=Link2 Fidelity Large Cap Stock Fund [FLCSX]. (2013b). Bloomberg. Retrieved from http://www.bloomberg.com/quote/FLCSX:US Fidelity Large Cap Stock Fund [FLCSX]. (2013c). Marketwatch The Wall Street Journal. Retrieved from http://www.marketwatch.com/investing/fund/FLCSX/holdings Mutual fund comparison. (2012). Market Watch The Wall Street Journal. Retrieved from http://www.marketwatch.com/tools/mutual-fund/ compare?Tickers=FLCSX&Compre=Holdings S&P 500 high quality portfolio. (2013). Retrieved from http://activequote.fidelity.com/webxpress/ popup_quote.phtml?SID_VALUE_ID=SHQ&time=8&freq=2&link=Link4 SPDR S&P 500 SPY. (2013). Retrieved from http://etfs.morningstar.com/quote?t=SPY Read More