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straints, Fidelity managers have wide latitude to implement their own investment strategies. Many talented investors, such as Peter Lynch, Will Danoff, and Joel Tillinghast, have emerged from this culture, which affords them the freedom to think and invest differently. Our favorite Fidelity Advisor funds are led by managers who have put this freedom to good use. Fidelity’s talent isn’t distributed broadly enough for investors to rely on its Advisor lineup alone, however. While much of the lineup might appeal to investors with limited choices, only a handful is compelling enough to choose over better, non-Fidelity alternatives. Others, especially many of its core offerings in the large-blend arena, are just too bland to choose at all. In fact, our least-favorite Fidelity Advisor funds are not offerings where the managers use their freedom unwisely, but ones where we’re not convinced that they have enough freedom to stand out. Here are our favorite Fidelity Advisor funds and ones that advisors should best avoid.

Fidelity Advisor Funds at a Glance
The Standouts
Fund Category Morningstar Rating Expense Ratio 3-Yr Anl TR (%) 3-Yr Anl TR % Rank Cat

New Insights FNIAX Equity Growth FAEGX Growth Opportunities FAGOX Dividend Growth FDGTX Mid Cap II FIIAX Small Cap Value FCVAX Municipal Income FAMUX

Large Growth Large Growth Large Growth Large Blend Mid Growth Small Value Muni Natl Long

{{{{ {{ { {{ {{{{ {{{{ {{{

1.18 1.39 1.02 1.3 1.17 1.4 0.79

–5.79 –10.41 –12.23 –9.35 –4.78 –4.75 4.54

21 80 94 38 24 13 28

Lost in the Crowd
Growth & Income FGITX Balanced FAIGX Dynamic Capital Appreciation FARAX Equity Income FEIRX Diversified International FDVAX Freedom Funds Large Growth Moderate Allocation Large Growth Large Value Foreign Large Blend Target Date {{ {{ {{ {{ {{{ Average* 1.34 1.29 1.08 1.07 1.31 NA –11.35 –5.40 –9.53 –13.04 –14.94 NA 87 64 71 71 72 NA

*Rating as of March 31, 2010. Data as of June 30, 2010.

Fidelity Advisor Equity Growth FAEGX

Best of the Bunch
Fidelity Advisor New Insights FNIAX

Simply put, manager Will Danoff is among the best investors in the business. In his two decades at Fidelity Contrafund, which he runs in the same strategy as this fund, Danoff has smoked most large-growth funds, not to mention the broad market indexes. He has succeeded by investing anywhere company fundamentals are improving, allowing him to cast a wide net: His top holdings include both Google GOOG and Berkshire Hathaway BRK.A. Danoff manages too much money to trade based on short-term factors. (Between this fund and Fidelity Contrafund, he oversees more than $70 billion.) But focusing on the long term means he can sniff out opportunities that his shortsighted competitors miss. For a growth-leaning core holding, this fund is an outstanding choice.

Manager Jason Weiner counts Danoff as one of his mentors, and it shows. His style is eclectic, and he’s unencumbered by traditional notions of what constitutes a growth stock. Unlike Danoff, however, Weiner isn’t constrained by asset size, freeing him to employ his fast-trading, sector-betting strategy. His approach can backfire; after rightly trimming his once-outsized technology stake in early 2008, for example, he wrongly loaded up on fast-growing industrials, leading to bruising losses for the year. Weiner, though, has usually gotten it right. This fund is too volatile and unpredictable to be a core holding, but it’s a great complement to one.
Fidelity Advisor Growth Opportunities FAGOX

with a helping of turnaround plays and steady-Eddies like Wal-Mart WMT. While many more-aggressive managers burn out quickly, Wymer has 20 years of experience under his belt, which has included top-rate returns during his 13 years at Fidelity Growth Company FDGRX. As a foil for a deep-value fund elsewhere in a portfolio, this offering is a great option.
Fidelity Advisor Dividend Growth FDGTX

Manager Steve Wymer is a classic growth investor. Valuation typically plays second fiddle to earnings growth in his analysis, while traditional growth areas like technology and health care are his stomping grounds. But Wymer’s strategy is more nuanced than it may appear at first blush. He balances fast growers

Since coming aboard in October 2008, manager Larry Rakers has turned around this one-time laggard by using the same highly successful strategy he employed at prior charge Fidelity Advisor Balanced FAIGX. Although Rakers avoids making big sector bets versus his S&P 500 benchmark, his portfolio is far from an index clone. Indeed, nearly half of the fund’s holdings aren’t in the index. Rakers draws upon research from Fidelity’s vast analyst ranks to invest in every corner of the style box. The fund’s all-cap complexion will likely make it more volatile than the large-blend competition, though it could provide just about all the U.S. equity exposure an investor needs.

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Morningstar Advisor - August/September 2010

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