Fidelity Leveraged Company Stock fund

Some days back I talked about the High Debt Anomaly and highlighted one of the funds from Fidelity which uses similar strategy. The CNN Money has a dated (2003) interview with the fund manger for Fidelity Leveraged Company Stock fund. It details his methodology. He has left Fidelity to start hiw own hedge fund.

Fidelity Leveraged Company Stock fund manager interview:

David Glancy's portfolio needs a warning label: This fund is filled with hated, debt-laden companies. With holdings that have included AES, Qwest and Tyco, Fidelity Leveraged Company Stock fund reads like a who's who of stock market outcasts. In fact, Glancy invests mainly in the stock of companies sporting debt ratings of triple B or below--the edge of junk bond territory.
It's familiar ground. The 41-year-old Glancy has spent the bulk of his career investing in high-yield, sub-investment-grade bonds. He's run $3 billion Fidelity Capital & Income since 1996, and in December 2000, when Fidelity launched the Leveraged Company Stock fund, Glancy started steering his first equity fund. The ties to his junk days are still quite tight: Leveraged Company is the only Fidelity stock fund managed under the auspices of the high-yield bond group.

Since its inception, the fund has posted a total return of --1.7% vs. a 34% loss for the S&P 500. "All things being equal, the fund ought to do better than the S&P in an up market and do worse in a down market," says Glancy. The reasoning is simple. In good times, highly leveraged companies can earn big returns on borrowed capital. But when the economy and market sour, the same companies can falter under heavy debt burdens. That's why Glancy's performance is so impressive. He's outrun the market in what should be his most adverse investing climate. MONEY staff writer Adrienne Carter caught up with Glancy in Fidelity's Boston offices to discuss how his focus on debt-ridden companies has defied a bear market.