Fidelity Event Driven Opportunities (FARNX, $14.43) invests in small and midsize companies going through a transition, such as a corporate reorganization, deletion from an index or a management shakeup. These companies are harder to analyze than most other companies, which keeps many investors away.
However, fund manager Arvind Navaratnam says that makes it easier to find “mispriced” or undervalued companies. At the moment, top holdings indicate that Washington, D.C.-focused real estate play JBG Smith Properties (JBGS) and Madison Square Garden (MSG) are among those potential opportunities.
Returns for the nearly five-year-old fund have been superb. It has outpointed the Russell 2000 index of small companies in every year but one, including 2018 so far.
By Fidelity standards, the fund is tiny with just $457 million in assets. Navaratnam likes to trade — turnover last year was 117%. Annual expenses are 1.11%. The fund is just about as volatile as the Russell 2000, but small stocks are typically volatile. The Russell is 40% more volatile than the S&P.
Jim Lowell, editor of the Fidelity Investor newsletter, sees this eclectic fund as a perfect antidote to the billions of dollars in “unthinking money flooding into” index funds. “When that tide turns, investors who are mistaking low cost for low risk will pay the heftiest price.” Funds like this one, he predicts, will shine.
