A master class on investing amid tariffs

There is always some uncertainty involved in investing, but this year investors have been hurled some unusual curve balls.

The early April announcement of sweeping tariffs on imports of foreign merchandise sent the stock market into a tailspin. To the surprise of many observers, stock market indexes then rebounded and have marched on to attain new record-high levels.

Initially, many investors planned to wait for greater clarity and finality on the exact levels and details of new tariffs so they could evaluate the impact on profits of individual companies. As uncertainty has lingered—and the market has galloped ahead—it’s become clear that investors can’t afford to keep waiting. But how can investors win at a game where the rules keep changing?

Sonu Kalra, co-manager of Fidelity^® Blue Chip Growth ETF () and the veteran manager of Fidelity^® Blue Chip Growth Fund (), views periods of unusual volatility such as in April 2025 as opportunities to “take advantage of some of the volatility and to upgrade the portfolio.”

When stocks he likes start to hit downside price targets and he feels the underlying fundamentals of the company are still healthy, he says, “I may start to lean into some of those names that I historically may have shied away from due to high valuations.”

Drawing on members of Fidelity’s global team of 120 security analysts, Kalra identified companies that would be less impacted by tariffs or, in some cases, not affected at all. For example, he looked for companies that possess powerful brands. “I felt that if the tariffs were to come through, these businesses would have the ability to pass those costs on and mitigate the majority of the headwind,” he says.

Seeking tariff-proof business models

One illustration of this strategy has been SharkNinja ().² Investors punished the stock in April due to its longtime manufacturing reliance on Asia—particularly China, which is in the crosshairs of new tariff policy. But Kalra observed that the innovative Boston-based company of kitchen appliances was rapidly moving production out of China. He also saw that its strong brand allowed it to pass on cost increases by effectively raising prices (which it could accomplish by slashing retail discounts, rather than by raising sticker prices), and that it was expanding outside its core kitchen category into new lines of grills and beauty and skin-care products.

Another potential way to beat tariff uncertainty? Look for companies that don’t deal in physical wares, such as service companies with subscription-based models. Kalra highlights streaming giant Netflix () as an example of a business model that may be relatively insulated from tariff pressures. “Netflix has done a tremendous job in becoming a leader in video-on-demand globally,” he says.

Maintaining a long-term perspective can be key to navigating such periods of headline uncertainty, when the news can change on a dime. Says Kalra, “Tariffs are a one-time hit to the economy. A year from now, we could be lapping it.”

In search of wide protective moats

Regardless of the news flow or the prevailing economic backdrop, Kalra, who has managed the traditional mutual fund version of Blue Chip Growth since 2009, adheres to a consistent investment philosophy and process. “I try to find companies that are participating in large, underpenetrated addressable markets where investors are not only mispricing the absolute rate of growth but also the durability and sustainability of growth,” he says.

In particular, he and supporting analysts seek companies that they believe have the potential to sustain earnings growth of 10% or greater for at least 3 to 5 years. Historically, hitting that double-digit earnings threshold has held strong predictive power for subsequent outperformance. It also helps to significantly pare down the universe of potential investing candidates.

“That 10% hurdle rate really provides a nice benchmark for us to fish in an economy where there are a lot of fish,” he says.

This leads him to companies in industries with high barriers to entry, that have strong competitive advantages, pricing power, and the potential to benefit from long-term tailwinds. He feels a growth blue-chip company should have a compelling business model that could enable it to achieve high levels of profitability for years to come. Kalra looks for businesses with robust levels of free cash flow (or with the potential to achieve that in the future), and high returns on equity and capital.

One component of the analysis is to determine if a company is gaining or losing market share. “When a company starts to show signs of market share plateauing or slightly declining, it’s a yellow flag for me,” he says, and can be a signal to start trimming a holding.

Quarterly company earnings results are a report card, he says. “The market grades the company and I get to grade the company.” Sometimes the report cards match up, but often they’ll diverge. For example, the market may punish a company that is delayed in launching a new product, perhaps due to a temporary supply-chain problem. But if the fundamentals remain sound then Kalra may use the dip as a buying opportunity.

Long-term tailwinds

He also identifies stocks with potential by tapping into certain enduring trends.

For example, more than a decade ago he and Fidelity analysts observed that e-commerce penetration was steadily growing across retailing, in a structural shift away from traditional bricks-and-mortar shopping. Amazon () has been a core holding, and “as the 800-pound gorilla, has continued to offer a great value proposition of selection, price, and convenience as they continue to expand in the US and globally,” he says.

He estimates e-commerce’s share of retailing revenue in the US at 17% to 18% (and growing), but notes that penetration is much higher in certain emerging markets such as China (close to 30%), which had a much less developed and more fragmented brick-and-mortar retail infrastructure to begin with.

Another powerful theme has been digital advertising. Kalra started his career at Fidelity as a media analyst in the late 1990s, so he was quick to pick up on the migration of audiences (and advertising dollars) from print and broadcast to digital media.

“One of the key mantras I learned was that ad dollars follow eyeballs,” he says. “As eyeballs shifted from traditional media to digital media, so did ad dollars.” Several of the top holdings of Fidelity Blue Chip Growth ETF and Fidelity Blue Chip Growth Fund, including Meta Platforms () and Alphabet (), have been large beneficiaries of this long-term migration of eyeballs to digital media.

AI: The fourth new technology wave of the millennium

Not surprisingly, artificial intelligence is also an important current theme for Kalra. NVIDIA (), the leading chipmaker for generative AI, was recently the top holding of both the ETF and mutual fund.

Kalra believes generative AI represents the fourth major technology innovation cycle of the past 3 decades. The first was the advent and development of the internet in the late 1990s and early 2000s; the second was the smart phone, which has transformed our daily lives and consumption habits over time; the third was the migration of companies’ information-technology infrastructures to the cloud.

There is still debate in the market about the importance of the generative AI theme. Kalra has little doubt that, as with the internet and smart phone, AI will be a transformational technology. But he believes it will take years to play out and may evolve in ways that defy prediction—as those previous technology cycles did.

“I think it’s hard for us to imagine what the second- and third-magnitude effects are going to be of generative AI,” he says. “To me, it’s very similar to the internet, which is now embedded inside every company. We’re still very early in adoption, which makes this an exciting time.”