Fund manager beating market with retail stocks c.2013 The New York Times

Fund manager beating market with retail stocks c.2013 The New York Times

Like any investor who owns retail stocks, Fidelity Investments fund manager Peter Dixon has had a close eye on Black Friday and the kickoff of this holiday shopping season.

But Dixon is less interested in how many people hit the stores this weekend than in how much they spend -- and which stores stand to profit the most.

Dixon oversees nearly $1 billion in his Select Retailing Portfolio, which is loaded with stocks such as Home Depot Inc. of Atlanta, Amazon.com Inc. of Seattle, and TJX Cos. of Framingham. Many of his top holdings aren't necessarily places people flock to for gifts, he said, but every retailer is battling for the consumer's dollar at this time of year, even for home improvement.

And he wasn't unhappy to see the likes of Home Depot launching Black Friday sales two weeks ahead of the pack.

''It's kind of a big food fight for the consumers' dollars," Dixon said, especially in a time of slow income growth. "If the consumer has a finite amount of dollars to spend, each retailer is going to want to capture as much of that as they can."

Dixon said he doesn't make investment decisions based on the holiday season. All the one-upmanship to entice people to shop in the middle of the night for bargains does not always deliver results to investors. With stores like Best Buy and Walmart promising to match competitors' low prices, he said, they could find their holiday profits squeezed.

It's all about earnings for Dixon, whose fund is beating the market by a ton this year. Fidelity Select Retailing is up more than 41 percent in 2013, compared with 29 percent for the Standard & Poor's 500 index during a strong period generally for stocks. The fund, which he's been running since 2010, also has beaten the market over three-, five-, and 10-year intervals.

Dixon's strategy is to focus on companies with strong brands and in categories he likes. With brands, for instance, he gravitates to popular names that consumers will go out of their way to buy, like Adidas and Lululemon athletic wear.

As far as categories, he likes off-price retailers such as TJX and "global fast fashion" chains like H&M. Fast fashion quickly moves the latest designs from fashion show runways to store racks.

The winners this season will be companies selling coveted brands and filling the category niches, Dixon said. The losers will be retailers that can't differentiate themselves with anything beyond low price.

Asked how his fund has beaten the market even during difficult times in the economy this past decade, Dixon suggests that there are always opportunities to make money because, "There's always something that consumers like and want to buy."

He watches economic trends, for sure, he said, but with retail, it's more about who's growing their earnings fastest. "There are always winners and losers in this space."