Q. I’ve heard good things about Fidelity Low-Priced Stock Fund and am thinking of including it in my individual retirement account. What’s your opinion?
J.C., via the Internet
A. What you heard is correct: Once the stock market began to unravel, it became this fund’s playground.
Talented, common-sense portfolio manager Joel Tillinghast snapped up companies with proven products, proven earnings, solid market share and the ability to prosper in difficult markets.
As a result, the $13 billion Fidelity Low-Priced Stock Fund gained 24 percent over the past 12 months to rank in the top 12 percent of all small value funds. Its three-year annualized return of 21 percent puts it in the top one-fourth of its peers.
There are often 750 stock names in this diversified fund’s portfolio and Tillinghast can speak extensively about any of them. The only limitation is that stocks can’t cost $35 or more per share at the time of purchase.
“Tillinghast is not someone who steps up to the plate and takes huge swings to knock a single stock out of the park, which should give an investor long-term comfort,” said Jim Lowell, editor of the independent Fidelity Investor newsletter (www.fidelityin
vestor.com), in Potomac, Md.
It’s an optimum time to buy because it has been closed to new investors three times in the past when it has reached certain asset levels, Lowell noted. Tillinghast created the fund in 1989 and, even during down times for small-caps, it has lost less than rival funds.
The portfolio’s largest concentrations are in industrials, financials, services and retailing. Its recent major holdings were D.R. Horton, Outback Steakhouse, Computer Sciences, AutoZone, Applebee’s International, Biomet, BJ’s Wholesale Club, Doral Financial, PMI Group and Sonic.
Fidelity Low-Priced Stock Fund requires a 3 percent load, or sales charge, a minimum initial investment of $2,500 and has an annual expense ratio of 1 percent.
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Q. How do I calculate long-term capital gains and losses on stock purchased through a dividend reinvestment plan (DRIP) and then sold?
H.S., via the Internet
A. You must remember to include the cost of dividends that were reinvested to buy additional shares of stock. Each stock’s purchase price is its cost basis.
“For example, your DRIP statement may indicate that you had a $10 dividend that through reinvestment bought one-quarter of a share,” explained Martin Nissenbaum, of Ernst & Young in New York. “The basis of that stock would be the amount of the dividend, which means you must keep track of every reinvestment.”
However, there’s an easier way to handle all of this.
“When selling stock in any DRIP, the easiest thing to do is to sell all shares in the plan at once, since your cost basis is the sum of whatever you invested in the plan,” said Charles Carlson, editor of the DRIP Investor newsletter in Hammond.
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Address inquiries to Andrew Leckey, P.M.B. 184, 369-B Third St., San Rafael, Calif. 94901-3581, or by e-mail at [email protected].