Investing in the beneficiaries of new federal and corporate spending

Amid uncertainty about the U.S. economy, Fidelity Portfolio Manager Dan Sherwood is investing in companies he views as beneficiaries of powerful spending trends aimed at increasing supply-chain resiliency, rebuilding the nation’s aging infrastructure, and combatting climate change.

“Many companies have made the strategic decision to pursue onshoring or nearshoring—relocating production facilities closer to home, or at least in countries with a stable, friendly political regime, as well as an educated workforce and advanced infrastructure,” says Sherwood, who manages Fidelity® New Millennium Fund® (FMILX). “Many of these firms are well-positioned for growth.”

Having been at the helm of the fund since October 2022, Sherwood brings a GARP, or growth-at-a-reasonable-price, approach to investing in companies in the earlier stages of development, which tend to be mid-caps.

Sherwood says he is eyeing several industries that could be boosted by historic federal government spending driven by recent U.S. legislation, including the Infrastructure Investment and Jobs Act ($550 billion in new infrastructure spending), the CHIPS and Science Act ($280 billion to bolster U.S. semiconductor capacity), and the Inflation Reduction Act of 2022 ($369 billion for energy security and climate-change programs).

Sherwood cites Eaton (ETN) as a fund holding that he believes is likely to benefit. The company is positioned to be an important player in the electric-vehicle market, with its world-class portfolio of EV products and software, and global expertise in electrical infrastructure development, he contends.

Quanta Services (PWR), a provider of construction and engineering services, looks set to ride a major, multiyear initiative announced in 2021 to underground 10,000 miles of power lines in California, according to Sherwood, explaining that the goal is to reduce the risk of major wildfires and address climate change.

Contract design and manufacturing firm Jabil (JBL), another company Sherwood has favored, serves original equipment manufacturers and product companies across multiple end markets and industries. Eaton, Quanta, and Jabil were among the fund’s top overweight positions at the end of November.

“I prefer investments in emerging-growth stocks, where I have a differentiated view on the magnitude of the growth rate,” says Sherwood. “Each of these companies fits that description, and I think they are positioned to benefit from the government’s spending plans.”

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Dan Sherwood
Dan Sherwood
Portfolio Manager

Dan Sherwood is a portfolio manager in the Equity division at Fidelity Investments.

In this role, Mr. Sherwood manages the Fidelity New Millennium Fund and co-manages Fidelity New Millennium ETF, Fidelity Advisor Mid Capp II Fund and VIP Mid Cap Portfolio.

Prior to assuming his current responsibilities, Mr. Sherwood was a research analyst responsible for covering a variety of software and IT services companies. Additionally, he was a research analyst on the Real Estate team, where he covered various real estate investment trusts (REITs) and other real estate related companies.

Before joining Fidelity in 2008, Mr. Sherwood was a vice president at Merrill Lynch Institutional Equity Trading, and an analyst for Merrill Lynch Institutional Equity Sales. He has been in the financial industry since 1998.

Mr. Sherwood earned his bachelor of arts degree from Yale University and his master of business administration degree from The Wharton School of the University of Pennsylvania.

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