Of Latin America and Dell. SMARTMONEY ONLINE: If I Only Held Dell
By Linda Molnar
SmartMoney Interactive
NEW YORK (Dow Jones)--Reports that the IMF and international banks were cobbling together a multibillion dollar rescue package for Brazil sent Latin American stocks and funds soaring this week.
T. Rowe Price Latin America (PRLAX), Fidelity Latin America (FLATX) and TCW/DW Latin American Growth (TLABX) all vaulted more than 20%. Of course, that's little solace for investors as each of these funds is still down more than 45% year-to-date.
Still, news of the Brazil bailout is the best thing to happen to emerging markets so far this year. At the end of June, Brazil owed $140 billion overseas, the highest of any developing country. Fears that Brazil would not be able to make its loan payments had decimated every Latin American stock market. But Brazil's efforts to restore its currency by hiking interest rates and cutting government spending have induced the IMF to give the aid that it has withheld so far from Russia. Banks want to help, too, because Brazil is reportedly the fifth-largest foreign market for U.S. commercial banks.
But Brazil's troubles aren't over yet, says Todd Henry, vice president at Rowe Price- Fleming International, the group that manages T. Rowe Price's international funds, including the Latin America fund. "The risk that Brazil's currency will be devalued has gone down, but the structural problems, such as the large fiscal deficit and the increase in interest rates, still exist," he says. "Even if Brazil doesn't devalue its currency, a recession - or at least slower growth in 1999 - is likely." Of course, hints of a global interest rate cut were also good news for Brazil. And for banks as well. This week both President Clinton and Federal Reserve Chairman Alan Greenspan suggested interest rate cuts may be ahead.
That sent financial services stocks higher, pushing three Fidelity Select funds - Regional Banks (FSRBX), Insurance (FSPCX) and Financial Services (FIDSX) - into top-five slots for domestic equity funds. A third Fidelity fund, Select Air Transportation (FSAIX), climbed 8.82% as investors rushed to the airline sector en masse as word spread via the press that the sector had simply gotten too cheap.
Still, the Fidelity sector fund to own this year has been Fidelity Select Computer (FDCPX). The fund is up 34% so far. Take a look at its biggest holdings - Dell Computer Corp. (DELL), up 181%, EMC Corp. (EMC), up 116%, and Cisco Systems Inc. (CSCO), up 71% - and you'll see why.
Dell is also the reason Janus Twenty (JAVLX), PBHG Large Cap 20 (PLCPX) and the Marsico Focus Fund (MFOCX) have held on to their spots among the top five domestic equity funds so far this year. Each has Dell in its top five holdings. And that means a lot to a nondiversified fund that owns just 25 or so positions.
(For more information and analysis of companies and mutual funds, visit SmartMoney Interactive at smartmoney.com
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