This Mutual Fund Has Beaten Its Index 97% of the Time Since 2007. Should You Buy?

A top-rated manager and his well-executed, high-quality investment process earn this fund a Silver-rating from Morningstar in 2024.

Jack Shannon 12 February, 2024 | 1:47AM
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Silver-rated Fidelity International Growth (Class Sr F5) is one of the better mutual funds in the foreign large-growth Morningstar Category.

Jed Weiss is a standout investor and began managing this fund at its November 2007 inception. This was his first portfolio management charge, but his early career experience as an analyst gave him broad exposure to different sectors in both developed and emerging markets, including regional banks, semiconductor companies, and waste management firms, which provided the foundation to run a diversified portfolio. He is the lone decision-maker on the mutual fund, but he works closely with Fidelity’s well-regarded central analyst team to generate and vet investment ideas. One of his edges is his commitment to his quality-first process, which helps keep him away from the more speculative corners of the market that often tempt his peers.

Weiss will pay up for first-rate companies, but an emphasis on business model quality helps temper the price risk. His process is rooted in finding companies that operate in industries with strong growth outlooks and high barriers to entry. These companies often trade at a premium, so the portfolio’s price multiples tend to be higher than its index. However, the persistent quality bias helps the fund protect capital on the downside. Investors should expect some U.S.-domiciled companies in this portfolio because Weiss looks at underlying revenue and cost exposures to manage sector or regional biases.

Since Weiss took over this fund through December 2023, the U.S. mutual fund's lone retail share class delivered exceptional results for investors, beating the MSCI EAFE Growth Index prospectus benchmark in 100% of rolling five-year periods and the MSCI ACWI ex USA Growth Index category benchmark in 97% of periods.

Key Morningstar Metrics for Fidelity International Growth Fund

Meet the Manager Behind This Top-Rated Mutual Fund: Jed Weiss

Manager Jed Weiss is a highly capable and experienced leader. He joined Fidelity in 1997 and spent 10 years as an analyst covering a wide range of sectors and industries in both developed and emerging markets, before taking over this fund in 2007. Weiss took a sabbatical in 2017, but that was to give his young family an international experience, and investors should not be concerned about his future here.

Weiss works closely with Fidelity’s well-regarded research team. He has access to all of Fidelity’s 100-plus research analysts, but he primarily works with the international small-cap team of nine analysts. Weiss collaborates with the analysts to refine investment theses, leaning on their sector expertise to help identify new opportunities and risks.

What Drives Fidelity International Growth’s Outperformance?

Since he began managing this fund in November 2007 through December 2023, the U.S. mutual fund's retail share class' 91% downside-capture ratio against the MSCI ACWI ex USA Growth Index category benchmark shows that the fund loses considerably less than the benchmark during drawdowns.

Given Weiss’ focus on owning companies that can maintain pricing power through both up and down cycles, this downside protection is expected and has powered results. From November 2007 through December 2023, the fund’s 5.1% annualized return comfortably beats the 2.7% and 2.5% gains from its average foreign large-growth peer and the category bogy, respectively. The fund’s consistency is exceptional; it outperformed its category and index in over 97% of rolling five-year windows over Weiss’ tenure through December 2023.

The strategy somewhat disappointed in 2022 because while it lost less than its average competitor, it did slightly worse than the index. Importantly, though, the quality focus kept the damage from being worse, as many peers who invest in similarly high-growth waters did considerably worse. The strategy rebounded in 2023, posting a 20.1% gain, much higher than the category index’s 14.0% rise, thanks in part to its financial holdings like Moody’s and S&P Global; though they are U.S.-domiciled, each earns more than 40% of revenues from outside the United States.

How This Top Mutual Fund Manager Delivers Above Average Returns

Jed Weiss knows what he’s looking for. He wants to own companies with strong pricing power that operate in industries with high barriers to entry. The latter is key, as he values companies on a five-year basis, and he wants to be sure that the businesses have strong enough advantages to keep potential competitors at bay. He likes low-debt companies, but he is willing to invest in leveraged businesses if they have the cash flows to support the debt levels. Weiss conducts his own research, but he also works closely with Fidelity’s sizable international research team to help dig deeper into company and industry fundamentals. Risk management is a hallmark of this strategy. Weiss wants to be sure that he is not making any unforeseen bets. He examines the portfolio for its revenues and earnings sources, and he is careful not to overly concentrate it in any given country, sector, or investment theme.

Weiss is opportunistic when markets get shaky. He has a wish list of quality companies he wants to own but whose valuations are a bit too high for his liking. He will often use market pullbacks, such as the coronavirus-driven drawdown in early 2020, to buy these companies at discounts. He did so with Kone, a Finnish elevator company he liked because of its sticky, recurring revenue from service contracts.

Weiss tends to own more U.S.-based firms than peers or the index (which excludes them by definition) since he looks at the underlying sources of costs and revenues to determine how exposed a business is to a particular region. He tends to own far fewer Chinese firms than the typical rival as well, as he sees too much uncertainty in the regulatory environment there to make a meaningful investment. Weiss is a patient owner, and portfolio turnover is generally below 25%, typically ranking in the lowest third of the category.


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About Author

Jack Shannon  is a manager research analyst, equity strategies, for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc.

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