Top picks 2013: New Markets, Select Industrials
These favorite funds look to emerging-market income and global infrastructure.
Our conservative pick for 2013 is Fidelity New Markets Income (FNMIX), and emerging market debt fund that invests mainly in dollar-donominated bonds issued by emerging country governments.
Meanwhile, our aggressive selection for the coming year is Fidelity Select Industrials (FCYIX), a global infrastructure play.
Back in the late 90s Fidelity New Markets Income was a very risky bet, but today it is mostly investment grade and risk is on par with a conservative high-yield bond fund.
We like it because inflationary pressures in emerging countries have abated, and unlike developed countries there are no chronic debt problems stemming from burdensome entitlement benefits.
Long-time manager John Carlson is one of the best in the industry when it comes to analyzing this segment, and his track record speaks for itself.
Fidelity Select Industrials is our pick for more aggressive investors. Much of the world is playing catch-up when it comes to transportation, power generation, clean water and medical technology.
And the shale boom is boosting domestic demand for industrial supplies and transportation services while at the same time reducing the cost of providing them. Low borrowing costs and better credit availability are helping too, especially where high-ticket capital goods are involved.
Best of all, low-cost foreign competition is not a problem for these firms -- emerging country copy-cats are neither willing nor able to compete because the markets are too specialized and the quality and reliability standards are too high.
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