"In managing Fidelity® Low-Priced Stock Fund (FLPSX) since 1989, I've tended to hold a lot of lesser-known tech stocks, and I think early 2020 market volatility could demonstrate some of the advantages of this strategy," says lead portfolio manager Joel Tillinghast.
Tillinghast says he understands the disappointment investors feel with "paper losses" amid a broad market sell-off, noting that it's a reality that is hard to completely avoid in a risk-off market environment.
Yet he believes strongly that holding reasonably valued tech companies with moderate growth could hold up better over time than owning more-popular and more-expensive tech stocks. "This is because some of the advantages of value investing tend to show up in down markets," he explains.
"Through all of this recent market uncertainty, I've stuck with what's worked for the Low-Priced Stock Fund for many years," he says. "That generally involves owning less-glamorous, defensively oriented companies with fewer spectators."
In the information technology sector, Tillinghast mainly favors smaller companies that trade for less than his research says they are worth.
Typically, he prefers to own firms he can buy at a discount to his estimate of intrinsic value, especially those that consistently generate cash flow and are backed by management teams with a history of capital-allocation discipline.
As of April 30, the fund held Seagate Technology (STX), a maker of storage drives. Another fund holding was Taiwan-based electronic components provider Hon Hai Precision Industry, which he liked for its diversified set of products.
Lastly, Tillinghast mentions engineering-software maker Ansys (ANSS), which he believes has opportunities tied to the production of autonomous vehicles.
"None are very popular picks, and each declined in the first quarter, but I'd rather hold these names than bet on market favorites I think are risky, especially amid uncertainty and volatility."
Fidelity® Low-Priced Stock Fund held securities mentioned in this article on April 30, 2020. As of this date, Seagate Technology composed 2.79% of fund assets, Hon Hai Precision Industry composed 1.63% of fund assets, and Ansys composed 2.09% of fund assets.
Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Investing in stock involves risks, including the loss of principal.
As with all your investments through Fidelity, you must make your own determination whether an investment in any particular security or securities is consistent with your investment objectives, risk tolerance, financial situation, and evaluation of the security. Fidelity is not recommending or endorsing this investment by making it available to its customers.
Past performance is no guarantee of future results.
Views expressed are as of the date indicated, based on the information available at that time, and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the speaker or author and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917