By Jim Lowell, Fidelity Investor

"Hot Hands" is a simple strategy: buy whichever Fidelity fund has performed best in the previous year and hold onto it throughout the upcoming one.

The methodology isn't complicated. There's no magic black box. But does it work? If you had followed the Hot Hand Investment strategy starting at the end of 1983, you would have netted a total return of 7,794.9%, while the return for S&P 500 would have been 1,665.8%.

On an annualized basis that's 16.3% for the Hot Hand versus 10.4% for the market and just 8.3% for the "worst" fund, contrarian strategy.

Here are the ground rules. First, I looked at all of Fidelity's retail diversified stock funds for each year between 1983 and 2012. I excluded single-sector funds, and balanced funds with significant bond positions) as well as non-diversified international (single-country) funds.

It is interesting to see how a simple system -- and you can't get much simpler than "buy last year's winner" -- can be made which can beat the market and most professional managers.

Buying the Hot Hand fund doesn't guarantee you are going to beat the index every year. In fact, the Hot fund only beat the index in just 16 out of 29 years. But that's not the point. It's the accumulation of market-beating returns that really makes the difference.

To put it another way, the good years were better than the bad years were bad. And over the long haul this strategy has delivered hedge fund-like gains without any of the hedge fund snafus.

Another caveat: I never advocate investing too much in the latest Hot Hand fund. That would foolishly fly against the diversified investment approach that I practice.

My 2013 Hot Hand Fund is Fidelity Emerging Markets Discovery (FEDDX).

Managed by top-ranked international markets manager, Ashish Swarup since its November 2011 inception, FEDDX is an emerging markets fund focusing mostly on small- and mid- cap emerging markets companies.

Currently, the top five countries are Taiwan (13.9%), Hong Kong (13%), South Korea (12.8%), India (9.2%), and South Africa (8.7%). The top three sectors are financials (22.2%), consumer staples (17.1%), and industrials (14.5%).

Swarup's focus is on companies that benefit from their ability to sell out their own backdoor to the growing consumer class of the emerging markets.

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