In the last five years, disruptors have shaken the auto-industry reimagining aspects of transportation. Behind the large brands whose logos are on the cars, there are a rich well of smaller technology companies focused on innovative within the automotive sector. Even with a microchip shortage, these companies are primed to make lasting changes in the cars we drive next, possibly as soon as this year.
There’s a new wave of safety, convenience, and driver-assist technology making its way into cars planned beyond model year 2021, says Fidelity’s Elliot Mattingly, and you won’t find them in just one manufacturer’s vehicles.
“I see opportunities to invest in growing component makers with a diversified set of customers, many of which have fairly low valuation multiples,” says Mattingly, portfolio manager of Fidelity® Select Automotive Portfolio (FSAVX).
In managing the fund, Mattingly seeks high-quality stocks with earnings growth that’s in line with or greater than the fund’s industry benchmark, on average.
“I’m always looking for stocks I think have long-term upside, and I’m increasingly finding them among some of the system suppliers, which are lesser-known firms with comparatively lower-priced stocks,” he says.
For example, as of March 31, the fund owned shares of auto supplier Aptiv (APTV), which makes a variety of components used in electric vehicles. The Dublin-based company’s systems are designed to save both space and costs, Mattingly says.
He also cited his stake in Canada’s Magna International (MGA), which makes electric vehicles on a contract basis for various manufacturers.
Looking ahead, Mattingly says he’s keeping a watchful eye on technology investments that seemed like science fiction just a few years ago, such as companies building electric vertical take-off and landing (eVTOL) systems. He’s also watching start-ups focused on advanced LiDAR, or light detection and ranging systems, which act as the eyes of self-driving “robotaxis.”
“Not all of these companies will be successful or even survive, so I’m doing the research and staying on top of these trends while trying to pick up stocks with good prices and solid prospects for the longer term,” Mattingly says.
Fidelity® Select Automotive Portfolio held securities mentioned in this article as of its most recent holdings disclosure. For specific fund information, including holdings, please click on the fund trading symbol above.
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