The large-scale move away from fossil fuels and toward an electric future is still in the early stages, and Fidelity Portfolio Manager Forrest St. Clair fully expects this global trend to accelerate for decades to come.
“While the most obvious reflection of this is the rapid global adoption of electric vehicles, it is but just one example of a broader shift toward electrification,” says St. Clair, who manages Fidelity® Small Cap Discovery Fund (FSCRX).
To this point, St. Clair describes how a growing number of municipalities—including Los Angeles, Seattle, and New York City—have moved to ban most natural gas appliances in the construction of new homes and apartments.
“As I see it, this illustrates how changing laws and regulations are chipping away at the natural gas market and shifting demand toward electric grids,” observes St. Clair.
In managing the fund, St. Clair focuses on companies with low implied expectations where there is a substantial disparity between the current share price and his view of the firm’s intrinsic, or fair, value.
He scrutinizes investments for a perceived margin of safety, assessed through both income statements and balance sheets, in an effort to own resilient firms with sufficient financial strength to manage through difficult conditions.
One way the portfolio has exposure to the theme of electrification, St. Clair highlights, is through a stake in EMCOR Group (EME), which he considers an attractively valued engineering and construction company whose businesses provide electrician services.
He notes that EMCOR has benefited from major federal economic stimulus to build new industrial facilities, particularly those that increasingly rely on electric power.
“You can’t automate these factory floors, let alone even turn on the lights, without electricians, which creates demand for EMCOR’s services,” says St. Clair.
He also cites Shawcor (SAWLF), a Canadian oilfield services firm with a specialty wiring and cable business, as being well-positioned to benefit from the electrification trend.
“Shawcor is nearing completion of its transition from an energy firm to an industrials company, which should bode well from a demand standpoint amid the world’s increasing reliance on electricity,” concludes St. Clair.
For specific fund information, including full holdings, please click on the fund trading symbol above. Securities mentioned were notable fund holdings as of October 31.
Forrest St. Clair is a portfolio manager within the Global Institutional Solutions (GIS) group at Fidelity Investments.
In this role, Mr. St. Clair co-manages the Fidelity Small Cap Discovery Fund and the Fidelity Series Small Cap Discovery Fund. He is also a member of the Fidelity Institutional Asset Management (FIAM) Small Cap team and manages the small company strategy, which he has done since 2009.
Prior to assuming his current responsibilities, Mr. St. Clair co-founded Skystone Capital Management, a small cap equity investment management firm, where he served as portfolio manager from 2005 to 2007. Previously, he held various roles within Fidelity, including that of portfolio manager, equity research analyst, and equity research associate. He has been in the financial industry since 1998.
Mr. St. Clair earned his bachelor of arts degree in biology from Williams College.