"Early 2020 market volatility has created situations where stocks have taken a hit, but my view of earnings hasn't fallen as much in comparison," says Dan Kelley, portfolio manager of Fidelity® Puritan® Fund (FPURX).
Kelley believes investors tend to put too much emphasis on recent events—including the outbreak and spread of the coronavirus. It's part of human nature, he says; the most recent headlines and the national zeitgeist tend to make their way into people's investment decisions.
This, he believes, can cause stock prices to disconnect with his view of underlying fair value—even for companies he thinks have a strong balance sheet and could see business opportunities in both a shrinking and growing economy.
Following are 6 fund holdings Kelley cites as illustrative examples of companies he thinks could hold up relatively well in good or bad times, and to which he added exposure earlier in the year:
In health care, Kelley tends to prioritize companies he thinks have an innovative research-and-development platform. He believes a few could help address the coronavirus pandemic through pioneering treatments and vaccines. For this reason, as of the end of April, the fund owned France-based global pharmaceuticals company Sanofi (SNY) and US-based biotechnology firm Regeneron Pharmaceuticals (REGN), which, between them, have expertise in both vaccines and antibodies. "They also have a history of collaboration, and each has been working on solutions to help stem the spread of the virus," Kelley says.
In information technology, he favors software-based business models that require customers to pay monthly or annual usage fees. For this reason, the fund continued to own shares of Adobe (ADBE), which makes cloud-based creative applications, and established a new position in Zoom Video Communications (ZM), which provides remote videoconferencing. Each has seen increased demand, Kelley says, adding that they could do well whether or not social-distancing restrictions remain in effect.
In the consumer discretionary sector, Kelley has invested in e-commerce companies that have taken share from brick-and-mortar retail. Some have seen recent robust demand due to customers buying more online to limit exposure to the coronavirus. The fund owned a large stake in Amazon.com (AMZN) and Kelley boosted the fund's ownership of China-based online retailer Alibaba Group Holding (BABA), noting that the company reached millions of additional consumers in the months after the virus broke out in China.
Fidelity® Puritan® Fund held securities mentioned in this article on April 30, 2020. As of this date, Sanofi composed 1.31% of fund assets, Regeneron Pharmaceuticals composed 1.48% of fund assets, Adobe composed 1.48% of fund assets, Zoom Video Communications composed 0.23% of fund assets, Amazon.com composed 5.76% of fund assets, and Alibaba Group Holding composed 1.00% of fund assets.
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